Livestock Market and Mortality Risk in East Africa

1. Livestock Market and Mortality Risk in East Africa Christopher B. Barrett Vet Med 615 Guest Lecture February 28, 2006

2. Overview • Livestock’s role in east African economic development • Wealth accumulation and mortality risk • Market risk • Conclusions

3. Livestock’s role in development • Livestock as input • Manure: mitigating soil degradation, spatial redistribution of nutrients • Traction services • Transport services Result: Improved productivity of agricultural or non-agricultural enterprises.

4. Livestock’s role in development • Livestock as a production system • Milk and blood (and social prestige): renewable outputs from a single animal • Meat, hides and skins: nonrenewable output from a single animal • Reproduction: dividends from the asset Result: Income stream generated directly by livestock

5. Livestock’s role in development • Livestock as a quasi-financial asset, providing savings and insurance • Store of value (walking bank) • Sometimes sold to stabilize incomes • Collateralizable for credit Result: Livestock can play a valuable role where access to conventional financial products is limited or where such products are unattractive.

6. Wealth accumulation and mortality risk Not everyone is equally able to acquire or maintain livestock • Agroecological differences (disease, aridity, etc.) • Lumpiness of investment (Dercon, JDE 1998) • Threshold effects (Lybbert et al. EJ 2004) • Herder ability (Santos and Barrett 2006)

7. Wealth accumulation and mortality risk Pronounced cattle cycles are common And accumulation dynamics are highly nonlinear Examples from Boran pastoralists, southern Ethiopia, per Lybbert et al. (2004 EJ)

8. Wealth accumulation and mortality risk • Mortality risk: • Resource competition: Tragedy of the commons? • Rainfall • Disease How idiosyncratic or covariate are these risks (i.e., what’s the best way to deal with them)? In southern Ethiopia, we find that, rainfall aside, mortality risk is idiosyncratic w/o any significant tragedy of the commons effect (see also McPeak 2005, Human Ecology, similar findings from northern Kenya).

9. Mortality rate 0.15 0.10 0.05 0.00 0 2 4 6 2.5 3.0 3.5 4.0 4.5 5.0 5.5 (b) Ln(Own herd size) (a) Ln(Average community herd size) Fig. 3. LOESS estimates of mortality rates, conditioned by (a) average community herd size and (b) own herd size, southern Ethiopian Boran pastoralists Wealth accumulation and mortality risk

10. Livestock market risk • Prices fluctuate dramatically • covary negatively with mortality … wealth hypervariable in livestock, unlike cropping systems where market prices covary negatively with yields, thereby stabilizing incomes and wealth. • rainfall, quarantine, seasons affect prices dramatically • limited spatial market integration, i.e., major price disconnects across distinct geographic markets Nairobi-Marsabit price differentials (“basis”)

11. Livestock market risk Estimated Effects of Drought On Livestock Prices (hypothetical drop of 200 and 300 mm over 3 and 12 months, respectively) Negative correlation exists between price and mortality because rainfall drives both lactation/reproduction and mortality. - big species variation Source: Barrett et al. (2003 J. African Economies)

12. Livestock market risk • For animals traded over long distances, intermarket margins appear the source of • most livestock price risk. For animals traded locally, local market conditions key: • - Auction vs. dyadic exchange • # traders/lorries (partly a function of food aid backhaul capacity) • veterinary services availability is negatively associated with market price due to endogeneity of vet care in markets (reflects disease problems that drive price down)

13. Livestock market risk Estimated Effects of Quarantine On Livestock Prices Animal disease control measures matter to prices (Barrett et al., 2003 J. African Economies)

14. Livestock market and mortality risk • Risks are much broader than just livestock, however, and livestock-related risk is minor to many livestock-dependent peoples • - Livestock disease, livestock prices and pasture availability are of greatest concern to wealthier men among Ethiopian/Kenyan pastoralists(Smith et al., J. Dev’t Studies 2001) • Poorer households are more concerned about human disease, violence and food availability. • Development priorities among pastoralists are typically related to health, education and security, not livestock production/marketing

15. Conclusions Livestock play a major role in rural development in east Africa - as inputs to ag/non-ag enterprises - as production systems - as quasi-financial asset But … - not everyone has equal access - mortality and market risk are considerable and tend to be mutually reinforcing, making livestock keeping a high risk-high reward activity.

16. Thanks very much for your comments and questions!