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| Figure 1. Existing beef cattle sources and market channel of livestock trade in Ethiopia. |
| Livestock Research for Rural Development 23 (12) 2011 | Guide for preparation of papers | LRRD Newsletter | Citation of this paper |
In this paper, the value chain of beef cattle production and marketing in Ethiopia were reviewed. The beef cattle production system and sources of beef cattle brought to markets, the marketing systems and the main actors in marketing live animal, export as well as the challenges and opportunities for the beef cattle value chain were elucidated. The beef cattle production systems were predominantly categorized as agro - pastoral system in the lowlands, and the mixed crop–livestock system in the highlands.
There was no strategic production of livestock for marketing except some sales targeted to traditional Ethiopian festivals. Markets are dispersed to remote areas lacking price information. Both legal and illegal livestock marketing systems are operating at different magnitudes. Small farmer exporters and traders are the major actors in the illegal cattle marketing system while medium to large-scale licensed exporters are dominantly operating in the legal system. The main challenges for the beef cattle production and value chain was the unofficial cross-border trade dominated by influential personalities and illegal exporters. Limited access to production and market-related information such as production systems, prices, value chains, competitors, consumer preferences and lack of capital to invest in assets, equipment and inputs that would improve quality are the major challenges faced by the market value chain. High demand of animals by the local abattoirs, increasing official exports and increasing domestic meat consumption are the opportunities that will enhance the system. Therefore, empowering poor smallholder farmers will help to provide high-quality, sustainable livestock production with an identified market destination and access to basic production inputs, credit, capacity-building, market-related information.
Keywords: Beef cattle, challenges, marketing, opportunities, value chain
The main idea of value chain is to highlight and map out specific physical commodity flows within a sector, including key stakeholders, through usually confining the analysis to domestic markets and ignoring dynamic adjustments to sector characteristics and relationships (Raikes et al 2000; Kaplinsky and Morris 2001). Value chain approaches have been utilized by development practitioners and researchers alike to capture the interactions of increasingly dynamic markets in developing countries and to examine the inter-relationships between diverse actors involved in all stages of the marketing channel (Giulani et al 2005; Pietrobelli and Saliola 2008). The value chain approach provides the basic understanding needed for designing and implementing appropriate development programs and policies to support their market participation. Indeed, many development interventions now utilize the value chain approach as an important entry point for engaging small farmers, individually or collectively, in high value export markets (GTZ 2007).
Livestock systems represent a potential pathway out of poverty for many smallholders in the developing world. The majority of the world’s rural poor, and a significant proportion of the urban poor, keep livestock and use them in a variety of ways that extend far beyond income generation. In many cases, livestock are a central component of smallholder risk management strategies (Bailey et al 1999). The economic contribution of the livestock sub-sector in Ethiopia is also about 12% of the total and 33% of agricultural Gross Domestic Product (GDP) and provides livelihood for 65% of the population (Ayele et al 2003).
Formally, Ethiopia exports approximately 200,000 livestock annually (Yacob and Catley 2010). This is significantly higher than the annual official exports of cattle (12,934 head), sheep (13,554 head) and goats (1,247 head) between 1998 and 2003 (Asefaw and Mohammad 2007). In Ethiopia, recent studies estimated that annual illegal flow of livestock through boundaries reaches as high as 320,000 cattle (Workneh 2006). This being the potential for export, the actual performance has remained very low, leaving most (55 to 85%) of the projected livestock off take for the unofficial cross-border export and the domestic market. These become barriers to understand and analyse the full range of activities required to bring a product (e.g. live animals, meat, milk, eggs, leather, fibre, manure) to final consumers passing through the different phases of production, marketing, processing and delivery to the consumers. It creates barriers to identify a market-focused collaboration among different stakeholders who produce and market value-added products. Beef cattle production and marketing systems in Ethiopia are characterized by long marketing chains featuring great distances, numerous phases of weight gain and feeding regimes, many levels of formal and informal traders and transactions, a multitude of steps and exporting processing, and a variety of employment-creating services and inputs. Therefore, the objective of the paper was to overview the value chain analysis of beef cattle production and marketing in Ethiopia with the following specific objectives.
the specific objectives of the review were
1. To overview beef cattle production system and sources of beef cattle brought to markets.
2. To identify the marketing systems and the main actors in marketing live animal export.
3. To quantify the challenges and opportunities for the beef cattle value chain.
4. To derive recommendations for development of cattle production through value chain approach.
Based on integration of livestock with crop production, level of input and intensity of production, agro-ecology and market orientation, livestock production systems in Ethiopia is categorized as pastoral, agro-pastoral, mixed crop-livestock farming, urban and peri-urban farming and specialized intensive farming systems (Mohammed et al 2004; Yitay 2007). However, the livestock production systems are predominantly categorized as agro-pastoral system in the lowlands, and the mixed crop–livestock system in the highlands. Traditionally, fattening of animals in both systems concentrates on male animals and on females which are either infertile or have finished their reproductive cycle. In the lowland agro-pastoral system, grazing is the most common source of feed, with limited use of crop residues, whereas in the highland system, crop residues are the most important source of animal feed. During the wet season, when crop residues are scarce in the highlands, male animals are taken to the lowland areas for grazing (Elias et al 2007).
There is little evidence of strategic production of livestock for marketing except some sales targeted to traditional Ethiopian festivals. The primary reason for selling livestock is to generate income to meet unforeseen expenses. Sales of live animals are taken as a last resort and large ruminants are generally sold when they are old, culled, or barren. In the highlands, large numbers of cattle are kept to supply draft power for crop production, whereas prestige and social security are the predominant factors in the lowland pastoral areas.
Markets are dispersed with remote markets lacking price information. Generally, the number of animals offered in the local market is usually greater than the number demanded, so there is excess supply. This effectively suppresses producer prices since the more mobile trader is better informed on market prices, while better information combined with excess supply place the trader in a better position during price negotiation. Livestock are generally traded by ‘eye-ball’ pricing, and weighing livestock is uncommon. Prices are usually fixed by individual bargaining and depend mainly on supply and demand, which is heavily influenced by the season of the year and the occurrence of religious and cultural festivals. Ethiopia’s livestock supply is heavily influenced by the severity of the dry season.
The livestock marketing structure follows a four-tier system, of which different actors involve in buying and selling of beef cattle in the market system .The main actors of the 1st tier are local farmers and rural traders who transact at farm level with very minimal volume, 1–2 animals per transaction irrespective of species involved. Some traders may specialise in either small or large animals. Those small traders from different corners bring their livestock to the local market (2nd tire). Traders purchase a few large animals or a fairly large number of small animals for selling to the secondary markets. In the secondary market (3rd tier), both smaller and larger traders operate and traders and butchers from terminal markets come to buy animals. In the terminal market (4th tire), big traders and butchers transact larger number of mainly slaughter type animals. From the terminal markets and slaughterhouses and slabs, meat reaches consumers through a different channel and a different set of traders/businesses.
In Ethiopia, both legal and illegal livestock marketing systems are operating at different magnitudes. Small farmer exporters and traders are the major actors in the illegal cattle marketing system while medium- to large scales licensed exporters are dominantly operating in the legal system. Most cattle sales are related to farm households’ cash needs and commercial orientation. However, cattle sales are also induced by fear of theft and insecurity (Elias et al 2007). Unofficial cross-border trade is practised in the eastern, western, and southern, and north western borderlands of Ethiopia. In addition to the Ethio-Sudan cross-border huge livestock trade, there are other important cross-border livestock trade operations: Ethio-Somalia, Ethio-Kenya and Ethio-Djibouti. The cross-boarder trade with Sudan involves predominantly male cattle. Un-castrated and fattened oxen are also exported legally. Few medium to high quality female animals are also exported, which are used for slaughtering in Sudan or for live animals re-export to Egypt, Libya and Yemen. Most of the borders are characterized by arid and semi-arid agro-ecologies where livestock play dominant role in household livelihoods. Eastern Ethiopian/Somaliland cross-border livestock trade accounts for the largest share among the four borders in terms of the volume and value of export from Ethiopia. Port of Berbera is the main outlet for livestock exports.
The purpose of the meat processing industries in Ethiopia is to produce and supply high quality meat products to the domestic and export markets. The export market is the main market of the meat processing industries of the country. Products supplied to the local and overseas markets by these companies are chilled/frozen beef, goat meat, mutton, chilled veal, chilled camel meat and red offals.
Consumers buy meat through one of the three channels: buying and slaughtering live animals, from markets and from abattoirs . They may purchase live animals directly from the terminal market and slaughter by themselves or they may get meat from markets, which by-pass the formal procedures through abattoirs; or they may access from butchers who process the meat via abattoirs. In the former two cases, consumers’ health may be at risk of zoonotic diseases and the government is also denied revenue from service charge from abattoirs. Livestock market locations in primary and secondary markets are typically not fenced; there are no permanent animal routes and no feed and watering infrastructures. Yet buyers and sellers are subjected to various service charges by the local authority as well as other bodies.
Ayele et al (2003) reported that current knowledge on livestock market structure, performance and price is poor and inadequate for designing policies and institutions to overcome perceived problems in the marketing system. One of the major challenges facing the beef cattle marketing and value chain has been that the competitiveness of these firms in the domestic and export markets has been limited by the underutilization of the processing capacities. It has been observed that the live animal throughput is inadequate resulting in the existing meat processing facilities operating at less than 50% of their operational capacities (Filip 2006). This is apparently due to inadequate supply of the required quality live animals for meat processing by the export abattoirs which makes them less competitive in the global or regional meat market. The export abattoirs are competing for the domestic supply of live cattle with the demand for live cattle for domestic consumption, and for formal and informal (cross-border) trade. According to ACDI/VOCA (2006b), location advantage, proximity to the strategic cattle markets and sea ports; ethnic similarities, same languages, social and cultural relationships with the people across the borders and weak economic and market bondages within the country have created conducive situations for illegal market links across the borders. The neighbouring countries bordering these areas either consume locally or re-export to other countries mainly to Middle East countries (ACDI/VOCA 2006b).
The livestock marketing structure in the pastoralist areas follows four tiers (Ayele et al 2003). These are bush, primary, secondary and terminal markets. The basis of such classifications is mainly the number of animals supplied and market participants per market day. Bush markets are markets where animals are exchanged weekly between the pastoralists and small-scale traders for breeding purpose or sells in the primary markets. Primary markets are district town markets where the volume of sale does not exceed 500 animals per week. The major sellers are pastoralists and small-scale traders, whereas the major buyers are assemblers (agents) and medium-scale traders. Secondary markets are major towns’ markets where the weekly supply volume is between 501 and 1000 animals. Here, the major market participants are medium-scale traders acting as sellers and the big traders as buyers. Tertiary/terminal markets are those markets located at the big cities of the country where over 1000 animals are supplied weekly. Big traders are major sellers whereas butchers and consumers are the major buyers. Livestock are generally traded by visual judgement. The weighing of livestock is uncommon though auction sales used to be practiced in the markets where weighing was also practiced in some developed towns. Prices depend mainly on supply and demand, which is heavily influenced by the season of the year and the occurrence of religious and cultural festivals (Daniel 2008).
The annual outflow of beef cattle from Ethiopia through illicit (informal) market is huge. The immediate destinations of this illicit export are Djibouti, Somalia, Sudan and Kenya which are further re–exported to the Middle East countries after meeting domestic demands (NEPAD-CAAD, 2005). The legal export of both live animal and processed meat is thus constrained due to shortage created by the illicit export. Recent studies estimate annual illegal flow of livestock through boundaries to be as high as 320,000 cattle (Workneh 2006). This being the potential for export, the actual performance has remained very low, leaving most (55 to 85%) of the projected livestock offtake for the unofficial cross-border export and the domestic market. According to Ayele et al (2003), the main sources for this illegal channel are mainly Somali region and Borena of south east and southern Ethiopia, respectively. The existing beef cattle sources and market channel of livestock trade in Ethiopia are indicated in the Figure 1.
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| Figure 1. Existing beef cattle sources and market channel of livestock trade in Ethiopia. |
The Figure illustrates that beef cattle is brought to market primarily from three sources: from farmers which produce the beef cattle, small scale to large scale producers organised in the form of cooperatives to fatten the cattle and some brokers which buy either from directly from producers and fattening cooperatives. Those animals brought to the market are exported legally by small and medium scale exporter and illegally by small scale exporter and farmers.
As a whole, the following are the main challenges faced beef cattle production, value chain and marketing:-
1. Lack of well defined breeding program and production systems.
2. Lack of an integral connection between the stakeholders involved in the production chain.
3. Inadequate market promotion and study tours to potential importing countries
4. Lack of efficient air transport for export of fresh and chilled meat.
5. Some markets are also dominated by influential personalities and illegal exporters.
6. Limited access to market-related information (e.g. on prices, value chains, competitors, consumer preferences).
7. Lack of capital to invest in assets, equipment and inputs that would improve quality (Daniel, 2008).
High demand of animals by the local abattoirs
The export abattoirs are required to ensure a consistent and continuous supply of meat in order to meet the demand of the customers in the importing countries. Thus, there is an urgent need for export abattoirs to devise alternative strategies to ensure adequate market supply of quality live animals to meet their processing needs in order to improve their efficiency and competitiveness. ACDI/VOCA (2008) stated that there were seven abattoirs in Ethiopia which processed canned meat products mainly for the army, domestic market and some exports. These abattoirs are located in Addis Ababa, Melge Wondo, Dire Dawa, Kombolcha, Gondar and Debre Zeit. Of these plants, Melge Wondo was to some extent preparing frozen beef and that of Debre Zeit abattoir produced chilled beef, sheep and goat meat for both domestic and export markets. With policy reformations after government change in 1991 in response to the available potential for meat export and the liberalization policy, the number of export standard abattoirs has increased.
According to Belachew and Jemberu (2003), there are few legal exporters engaged in the export of live animals and meat in the country. These exporters secure livestock from pastoral areas by themselves or through agents for export in live or meat form (chilled mutton, goat meat and beef). The Livestock Marketing Authority (LMA) (2004) estimated the annual potential for export at 72,000 metric tons of meat. NEPAD-CAAD (2004) identified the Middle East and North African countries which are considered important for the country’s export in livestock and livestock products (LLP) to be Saudi Arabia, United Arab Emirates, Bahrain, Yemen, Jordan, Kuwait, Oman, Qatar, Iran, Syria and Egypt. The annual demand of these countries is estimated to be 206,846 tons of meat and 12 million heads of live animals (cattle, sheep and goats). Based on Workneh (2006), the estimated national offtake rates of 10% for cattle, pastoral areas of the country alone, could produce 734 000 heads of beef cattle per annum. When these are compared to the current demand in the Middle East, they meet only 42% for beef. However, the live beef cattle supplies are well over the demand (144%), thus requiring new market outlets.
The exports of meat and live animals have dramatically increased in 2010-2011 Ethiopian fiscal. Ethiopia exported 16,877 tons of meat and 472,041 head of live animals, recording a 69 % increment from last year’s export revenue. Ethiopian revenue and customs authority reported that live animal export in 2010 contributed 70% of the earnings while 30% was obtained from meat export (Trade bulletin, 2011). The same bulletin also revealed that chilled sheep and goat carcass accounted for 80%, beef 9% and offal 11% of the exported meat. Of the number of exported live animals, cattle accounted for 46%, sheep 35%, camels 13% and goats 6%. In terms of revenue, cattle contributed 67%, camels 25% and sheep and goats 8% to the revenue generated. There is also the possibility of expansion to Asian markets such as Malaysia, which require halls-slaughtered, frozen, skin-off carcasses with less stringent hygienic regulations.
The domestic meat demand is believed to increase with increasing literacy and family income. Meat consumption is often an indicator of the economic status of a country or an individual. People with a higher social or economic status demand a greater amount of high-quality meat products. The per capita consumption of meat in developed/industrialized countries is much higher than in developing countries. Countries whose population consumes the least amount of meat are located in Africa and Asia.
Developed countries consumed a consistent level of 77 kg of meat per capita annually, while developing countries struggled to maintain a diet with only 25 kg of meat per capita annually. Ethiopians remained slightly below the meat intake of all low-income countries and consuming 9 kg per capita annually (Abbey 2004). Livestock market value chain structure that should be taken as an opportunity is indicated in Figure 2.
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| Figure 2. Livestock market value chain structure Sources: International Fund for Agricultural Development (IFAD, 2007) |
The livestock production systems in Ethiopia predominantly are agro-pastoral system in the lowlands and the mixed crop–livestock system in the highlands. However, the production of beef cattle will remain low unless supported by intensive production system. There is little evidence of strategic production of livestock for marketing except some sales targeted to traditional Ethiopian festivals. Sales of live animals are taken as a last resort and large ruminants are generally sold when they are old, culled, or barren. Markets are dispersed with remote markets lacking price information. The annual outflow of beef cattle from Ethiopia through illicit (informal) market is huge 320,000 cattle .The immediate destinations of this illicit export are Djibouti, Somalia, Sudan and Kenya which are further re–exported to the Middle East countries after meeting domestic demands. Both legal and illegal livestock marketing systems are operating at different magnitudes. Unofficial cross-border trade is practised in the eastern, western, and southern, and north western borderlands of Ethiopia. Some markets are also dominated by influential personalities and illegal exporters. Limited access to production and market-related information such as production systems, prices, value chains, competitors, consumer preferences and lack of capital to invest in assets, equipment and inputs that would improve quality are the major challenges of the market value chain. High demand of animals by the local abattoirs, increasing official exports and increasing domestic meat consumption are the opportunities that will enhance the system.
Recommendations
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Received 5 November 2011; Accepted 25 November 2011; Published 1 December 2011