Christopher B. Barrett Vet Med 615 Guest Lecture February 28, 2006

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 non- agricultural 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 Pronounced cattle cycles are commonAnd accumulation dynamics are highly nonlinear Examples from Boran pastoralists, southern Ethiopia, per Lybbert et al. (2004 EJ)

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). Wealth accumulation and mortality risk

(a) Ln(Average community herd size) Mortality rate Fig. 3. LOESS estimates of mortality rates, conditioned by (a) average community herd size and (b) own herd size, southern Ethiopian Boran pastoralists 0246 (b) Ln(Own herd size) Wealth accumulation and mortality risk

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) Percent Price Change MalesFemales Camels Marsabit Moyale CattleMarsabit Moyale GoatsMarsabit Moyale SheepMarsabit 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)

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)

Livestock market risk Animal disease control measures matter to prices (Barrett et al., 2003 J. African Economies) Estimated Effects of Quarantine On Livestock Prices Percent Change MalesFemales CamelsMarsabit Moyale Nairobi CattleMarsabit Moyale Nairobi GoatsMarsabit Moyale-1.1 Nairobi SheepMarsabit Nairobi0.20.1

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

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.

Thanks very much for your comments and questions!