in
Livestock Market
and Mortality Risk
East Africa
Christopher B. Barrett
Vet Med 6273 Guest Lecture
January 31, 2012
Overview




Livestock’s role in east
African economic
development
Wealth accumulation
and mortality risk
Market risk
Conclusions
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 nonagricultural enterprises.
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

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.
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)
Wealth accumulation and mortality risk
And accumulation dynamics are
often highly nonlinear
70
Trend line: Herd1980+t = 51.3-1.7t
60
50
40
30
20
10
19
96
19
92
19
88
19
84
0
19
80
Median household herd size
Pronounced cattle cycles are common
Year
Examples from Boran pastoralists, southern Ethiopia, per Lybbert et al. (2004 EJ)
Wealth accumulation and mortality risk

Mortality risk:



Resource competition: Is there really a “tragedy of the
commons” any place lacking private land rights?
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). But
rainfall is a major covariate risk (on which, more later).
Wealth accumulation and mortality risk
Mortality rate
0.15
0.10
0.05
0.00
2.5
0
3.0 3.5 4.0 4.5 5.0 5.5
(a) Ln(Average community herd size)
2
4
6
(b) Ln(Own 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
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”)
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.
Males
Females
Marsabit
-3.1
-4.6
Moyale
-8.1
-11.9
Marsabit
-22.1
-52.3
Moyale
-33.4
-47.5
Marsabit
-14.6
-17.4
Moyale
-12.2
-16.3
Marsabit
-21.3
-34.1
Percent Price
Change
Camels
Cattle
- big variation among species
Goats
Source: Barrett et al. (2003
J. African Economies)
Sheep
Livestock market risk
For animals traded long distance, intermarket margins are 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)
- vet services availability is negatively associated with market price due to vet
care endogeneity in markets (reflects disease problems that drive price down)
Livestock market risk
Estimated Effects of Quarantine On Livestock Prices
Percent
Change
Camels
Cattle
Goats
Sheep
Males
Females
Marsabit
-9.1
-6.4
Moyale
-6.2
-3.7
Nairobi
0.2
0.1
Marsabit
-23.7
-12.2
Moyale
-16.1
-7.4
Nairobi
2.4
2.2
Marsabit
-2.1
-2.4
Moyale
-1.1
-1.0
Nairobi
0.4
-0.1
Marsabit
-5.9
-2.7
Nairobi
0.2
0.1
Animal disease control measures
matter to prices (Barrett et al.,
2003 J. African Economies)
Livestock market and mortality risk
Risks are much broader than just
livestock, however, and livestockrelated risk is minor to many
livestock-dependent peoples
- Livestock disease, prices and pasture
availability of greatest concern to
wealthier men in Ethiopian/Kenyan
pastoralists(Smith et al., JDS 2001)
- Poorer households more concerned
about food security, human health,
(Doss et al. World Dev’t 2008).
- Development priorities among
pastoralists are typically related to
health, education and security, not
livestock production/marketing (McPeak
et al. J. Dev’t Studies 2009)
Index-based livestock insurance
Drought-related covariate livestock mortality
risk is key. A new, commercial index-based
livestock insurance (IBLI) product launched in
Marsabit, northern Kenya in Jan 2010.
Now being adapted and extended to Ethiopia
and expanded to other ASAL districts in Kenya.
Also being adapted to other contexts (e.g.,
hornbills conservation in southern Thailand,
Chantarat et al. PNAS 2011)
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.
- working on developing viable
insurance for livestock assets
Thanks very much for your
comments and questions!