Market Structure and Function for Live Animal and Meat Exports in Some Selected Areas of Ethiopia

Abstract

Despite this growth, exports from the livestock sector remain a small fraction of Ethiopia's overall agricultural sector. It was only 12% o f the total agricultural export in 2006/07 o f which 62% came from hides and skins 23% from live animals and 15% from meat export. To improve the competitiveness of live animals and meat export from Ethiopia cost-effective marketing channels and coordinated supply chains, which reduce the transaction costs among different actors along the supply chain, are crucial. This will require not only the competitiveness o f individual firms but also improving the efficiency o f all its elements from production, to processing, handling, distribution, and marketing. The purpose o f this study was to conduct analysis on the operation o f livestock marketing system with a view of possible improvements in light o f emerging market opportunities and capacity building needs. From the survey of marketing systems focusing the major exportable live animals and meat in the country, the study tries to map the marketing channels and value chains for live animals and meat exports and estimate the distribution o f costs, margins and prices for the different participants in the identified value chains. This study is based on the primary data collected from major pastoral markets o f the country supplying livestock to the export market and time series secondary data collected from these areas. The findings o f this could be summarized as follows: ® Over the last one and h a lf decade, there has been an increasing trend in the number o f animals supplied to the main supply markets. The substantial increase o f price in part is expected as a motive for the positive supply response. Empirical analysis of the time series data collected from the Borena pastoral markets also suggests the responsiveness o f livestock supply from the rangelands to an increase in market price. • The existing export abattoirs are found to operate at less than 50% o f their installed capacity. They unanimously attribute their under capacity operation to supply shortages o f export quality animals. However, over 50% o f them were found to focus on 5 markets as their main sources o f shoats. This indicates their limited penetration o f production areas to collect export quality animals which calls for the review o f their marketing strategies, • In the existing livestock marketing chains, the structure o f the livestock market shows limited participation o f market actors in the value addition process. This shows that beyond transporting and limited fattening operation, relatively few market services are usually observed in the process. Thus, there is a need for the private sector to consider investment in slaughtering and further processing o f beef and shoat meet rather than focusing on a mare live animal export. • Transport cost from production areas to the center are the major cost components o f marketing operations. The size o f marketing costs therefore declines as the involvement o f transport, handling and other related services by the market becomes small. • Analysis o f the total marketing costs o f each actors participating in different channels indicated that exporters have the highest costs, followed by feed lot operators, big traders, small traders and then collectors. Multiple and high tax payments and buying agent's costs are also important components o f marketing costs almost for all actors participating in live animal and meat export channels. These cost items indicate a need for targeted policy and development intervention since they have big impact on the competitiveness o f meat export from Ethiopia through inflated domestic cost o f meat production. Thus, the following recommendations are suggested to improve the competitiveness o f Ethiopian livestock and meat: o development o f cost effective livestock transportation systems, o policy decisions to cut down the number o f taxations on a single animal, o fixing uniform taxation in a given region, o enforcing law and order in market places and reducing the power o f brokers in livestock markets are suggested ® The analysis o f producers share in the final selling price for the different channels clearly indicates that if different linkages o f producers with end-markets actors are established, the producers would be in a position to capture a significant share o f the value added in the market channels. • In addition, as the number o f links in the market channel expands, the size o f the marketing margin each market participant enjoyed would decline. Thus, it is important to encourage shorter channels in order to boost the benefit o f producers. • Prices usually build up toward a peak or down to a certain occasion such as Christian fasting, Muslim fasting, holidays and other times; time o f a situation whether that specific month falls during ban time or not and season described as wet or dry season. Age group and body condition o f the traded animals are an important observable attributes o f the animal affecting price in the market. Though .pastoral livestock marketing cooperatives are established to protect the interest o f their members, price o f livestock was found to be lower when producers sell their animals to cooperatives. This is because o f the composition o f members most o f which are petty traders than producers. Thus, due care should be taken when establishing pastoral cooperatives in order to boost the proportion o f final livestock prices obtained by producers and motivate them for improvements in their production system.