Analysis of cattle marketing channels used by small scale farmers in the Eastern Cape Province, South Africa
L Musemwa, C Chagwiza, W Sikuka*, G Fraser, M Chimonyo** and N Mzileni***
Department of Agricultural Economics and Extension, University
Of Fort Hare, P. Bag X1314, Alice 5700, RSA
lmusemwa@yahoo.co.uk
*Department of Agricultural Economics, University of
Stellenbosch, South Africa, P. Bag X1, Matieland 7602, RSA
**Department of Livestock and Pasture, University Of Fort Hare, P. Bag
X1314, Alice 5700, RSA
***Agripark, University of Fort Hare, P. Bag X1314,
Alice, 5700, RSA
Abstract
The study identified the cattle marketing strategies used by small-scale farmers in Kamastone village, Eastern Cape Province. Factors influencing the smallholder farmers' choice of cattle marketing channels were investigated. Based on the findings, the study suggested strategies to improve the marketing of cattle by the small scale farmers. The development of an efficient and sustainable livestock marketing system for the small-scale farmers was identified as one of the main strategy that would improve small scale farmers' access to formal markets. An improved livestock marketing system is likely to increase participation of small scale farmers in commercial agriculture that would mean higher income for them.
Keywords: access to markets, communal areas, farmer perception, formal marketing, sustainable marketing channels
Introduction
Livestock farming is a tradition within South African rural systems. It is therefore not a coincidence that the Integrated Sustainable Rural Development Strategy (ISRDS 2004) identifies livestock farming as the agricultural enterprise with the most likely chance of improving household food security and addressing poverty alleviation in communal farming areas of South Africa (Coetzee et al 2005). In South Africa, cattle are marketed through a number of channels and these are broadly divided into two categories, namely the informal and formal markets. The former consists of individuals buying livestock for different reasons which include slaughter, as an investment or for social functions such as funerals, customary celebrations, weddings and religious celebrations. The latter consists of selling directly to butcheries, auctions and abattoirs.
In terms of market access, Jooste (2001) concluded that the transition of the small scale sector towards commercial production will ultimately be determined by its access to markets. According to Stroebel (2004), several constraints affect the efficient marketing of livestock in the Eastern Cape Province of South Africa, chiefly of which, are poor marketing infrastructure, lack of marketing herd size, high transaction costs and low purchasing power of buyers. This implies that marketing of livestock is probably one of the most complex policy issues to be addressed for enhancing sustainable smallholder agriculture (Jooste 2001).Historically, the small scale communal cattle producers have found themselves in a difficult market position because individually they lack sufficient volumes of uniform cattle to attract buyers to their farms (Jooste 2001). Although a number of market outlets do exist in the province, Nkosi and Kirsten (1993) pointed out that small scale communal farmers sell their cattle through informal marketing channels which in most cases have low purchasing power and as a result farmers get relatively low prices for their animals. Thus the challenge to livestock farming in communal areas is making use of marketing channels that offers the best cattle prices and hence highest returns. Benson et al (2001) indicated that these decisions require reliable information about cattle prices, the right selling time, the channels available, cattle breeds and the age of cattle that give the highest returns.
The main objective of the study was to identify cattle marketing strategies
used by communal cattle farmers. In addition, the study investigated the factors
influencing the farmer's choice of marketing channels and assessed whether these
variables have an effect on the farmers' choice of marketing channels.
Materials and methods
Description of study site
The study was conducted in Kamastone villagewhich is under the Lukhanji Local Municipality of Chris-Hani District Municipality. It is located about 30 km from Queenstown. Kamastone is an arid area with average annual rainfall of about 400 mm. The dominant vegetation type is the false thornveld of the Eastern Cape. The village has an estimated population of around 1200. Each household has an estimated arable land holding of about 2.5 ha. Agriculture is an integral part of Kamastone village, with livestock farming being the most dominant agricultural activity in the area.
Data collection
70 respondents were randomly selected from a list of 210 cattle farmers provided by the chairman of the farmers union in Kamastone. As a way of improving the data quality, a structured questionnaire consisting of both open ended and closed ended questions was the major tool used for data collection. The questionnaire was designed to specifically capture and enable the study to identify factors (the availability and state of marketing infrastructure, number of cattle, experience, household characteristics, cattle marketing and transaction costs) that could influence the farmers marketing strategies. In addition to the questionnaires, other methods of data collection such as observation and discussions with the extension officers, marketing agencies, cattle buyers and academics that had done research on the field of livestock marketing were also used.
Statistical analyses
Descriptive statistics was applied to the basic characteristics of the sampled households in order to assess the difference in the household participation. This employed both frequency and means to describe the variables. The study also tested variables (age, education, product marketing, the state or availability of infrastructure, herd size, experience and transaction costs) individually whether they had an effect on the farmers' choice of marketing channels (auctions, private sales, speculators, abattoirs) using the Chi-square test and the generalised least squares test. Thus, when testing the significance of each variable, other variables were held constant. The results were interpreted in terms of odds ratio. The likelihood ratio test was used in automatic variable selection procedures available in Statistical Analysis System Software (SAS 1985). All the analyses were carried out using SAS at 5 % significance level. For transactional costs a method developed from Vakis et al (2006), was used. The diagram below shows the scale that was used to measure transaction costs.
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Results
Main reasons for keeping cattle
There are multiple reasons why farmers keep cattle. With reference to the figure 1, the main reason why Kamastone farmers keep cattle was for income generation.
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Cattle can be sold at a certain negotiable price and an individual gets money. About 26 % of the respondents indicated that they kept cattle for family consumption (provision of milk and meat). In the area, cattle played a very important role in crop production, 9 % of the respondents indicated that they used cattle for draught power. The farmers could not afford to purchase or hire tractors for ploughing, so they depended on draught animals for cheap and most affordable source of power to drive their farm activities. Only 3% of the farmers indicated that cattle were a source of wealth. The other 3% indicated that cattle were for traditional purposes like payment lobola.
Household characteristics
Sex of the farmer
Both men and women were engaged in cattle farming. Men constituted the highest percentage (80%) and women accounted for only 20%. Most households interviewed were male headed and just a few were female headed as a result of rural-urban migration. Most of the males had left the village in search of greener pastures in urban centres. Because the majority of the respondents were predominantly male, sex was not considered as a variable that influences the farmers' choice of marketing channels.
Age of the farmer
Age affected response (p < 0.05). Age had the same effect on the choice of marketing channels to farmers who were using private sales, speculators, abattoirs and to those who using both private sales and auctions. Young farmers (mean age = 49) used auctions. The older the farmer, the more they run away from selling their cattle through auctions. The majority of farmers in Kamastone were aged above 60 and these marketed their cattle through private sales (friends and relatives) and speculators. In addition, these farmers indicated that their main reason why they keep cattle was for traditional and traction purposes, as a result they do not sell much. Most of the old farmers were uneducated and lacked information on cattle marketing (prices) and these were the main target of speculators who take advantage of the information gap between buyers and sellers. The main reason why old people were selling to speculators and private sales was because old people are risk averse and preferred working with close people or relatives. Lack of access to information, ignorance and attitudes towards formal markets explain the reason why the majority of old people were not using auctions and abattoirs.
Farmer's level of education
Level of education had an effect on choice of marketing channel (p< 0.05). Most of the farmers were not educated (57 %). All the framers who were using abattoirs were educated. No educated farmers were using private sales. Figure 2 illustrates the results.
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Infrastructure
Infrastructure availability and state had a significant effect on choice of marketing channel (p< 0.05). The auction pens in Kamastone were in poor condition. The nearest abattoir was in Queenstown (approximately 30 km away from Kamastone). In addition, the nearest butchery was approximately 10km away from the village.
Transaction costs
Transaction costs had a significant effect on the choice of the marketing channel (p < 0.05). Transaction costs (TC) faced by the farmers were mainly as a result of transport costs, information costs, speed of payment and enforcement costs. Farmers that marketed their cattle through speculators had the lowest transaction cost of 5 resulting from lack of information. Farmers that used auctions had a score of six for transaction costs. The TC of both speculators and auctions were closer to zero, thus these farmers had low transaction costs. Farmers that were using private sales and abattoirs had the highest transaction costs of 10 and 13 respectively.
Herd size
The average size of cattle owned by each farmer was 16; this number is relatively high for a farmer to market his cattle annually. Farmers who used auctions, private sales, speculators, abattoirs and both auctions and privates sales had an average herdsize of 16, 17, 17, 10 and 24, respectively. Farmers who were selling to both auctions and private sales were having the highest average herdsize and those who were selling to abattoirs had the smallest average herd size. Herd size had no effect on the choice of marketing channel (p> 0.05). Test of correlation between herd size and age showed that age and herd size were highly correlated.
Farmer experience in cattle rearing
Experience of farmer in keeping cattle affected the choice of marketing channel (p<0.05). Experienced farmers were using private sales, speculators, abattoirs and both auctions and private sales. The average years of experience of farmers who were using auctions, private sales, speculators, abattoirs and both auctions and private sales were 18, 34, 29, 19 and 22, respectively (Figure 3).
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Farmers with the smallest mean years of experience were using auctions and those with the highest mean years of experience were selling their cattle to private buyers.
Product marketing
Over 50 % of the respondents marketed their cattle. This indicates that most farmers do keep cattle as the source of income. There was an association between product marketing and the choice of marketing channel used by the farmers (p<0.05). As shown in Figure 4, 40 % of the farmers who marketed their cattle sold to auctions, 3 % to private sales, 8 % to abattoirs and 3 % to both auctions and private sales.
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From the farmers who did not market their cattle, 20 % sold to private sales where the buyers were mainly friends and relatives. Only 6 % of the farmers sold their cattle to auctions, 11 % to speculators and another 11 % to both private sales and auctions. Farmers who were selling to abattoirs did not market their cattle because those farmers were well informed about market prices and they were educated to the extent that they did not for example advertise their cattle to neighbours because they normally buy at credit. Farmers selling to speculators also behaved in the same way in terms of marketing as those selling through abattoirs because speculators normally target the group that lacks information about the prevailing market conditions, and hence speculators normally persuade the farmer to sell their cattle. Normally farmers selling to speculators do not have room for marketing their cattle, since speculators come anytime they predict a good profit.
Marketing channels
The main marketing channels were auctions, private sales, speculators and abattoirs. Each individual farmer had some reasons in relation to the choice of the marketing channel. The majority of the respondents (46%) sold their cattle through auctions. The farmers reported that auctions were easily accessible and reliable. In addition, it was the only local formal channel in which the farmers could market their cattle. Only 14% of the respondents sold their cattle to the speculators in which they indicated that they are satisfied with the use of this channel since there are no delays in payments and the buyers just pay on spot. Speculators were not commonly used since speculators were not regularly available. About 25% of the respondents sold their cattle through private sales. The respondents indicated that most of the cattle sold through this channel are mainly for functions such as traditional ceremonies, funerals and weddings. The farmers indicated that they were dissatisfied with speculators because of they delayed in effecting the payments. Despite these drawbacks, the respondents indicated that private selling was the simplest form of marketing cattle since the buyer just comes and buys from the seller's kraal. No transport costs were, therefore, incurred. 11% of the respondents were using both auctions and private sales. Only 6% of the farmers used abattoirs, since they were far away from the study area. The main reason why the majority of farmers were not using abattoirs appeared to be the fact that the farmers do not trust the grading system of abattoirs, and had a fear of their cattle being condemned. Thus could result in them suffering capital losses.
Strategies for improving cattle marketing
It is evident that an integrated approach is likely to underpin an efficient livestock marketing system. This entails an understanding of farmer livelihoods (household characteristics) and their development in a much more explicit context of community dynamics.
The formation of Small Farmer Groups and Associations has the potential to increase the participation of small scale cattle farmers in formal markets. This worked well in a vegetable farming project of Fort Hare Farmers Group of Zanyokwe irrigation Scheme. This group of farmers penetrated large markets which include Pick 'n Pay and Fresh Produce Market in East London(David et al 2005). This can also be adopted in livestock marketing by small scale farmers.
Formation of cattle marketing groups lower transaction costs, increase access to information and increase participation into formal markets. The market and bargaining power that a farmer can receive in a small group of between two to five farmers is obviously less than that from a larger group. By aggregating into larger associations such as inter-group associations, small scale farmers have the potential to achieve even greater economies of scale in accessing services, information, infrastructure and markets. As far as transporting cattle is concerned, costs can be easily cut if these groups use the same transport to the market. By transporting in bulk they stand a better chance of getting good discounts from transport firms as compared to transporting as individuals and in small quantities.
By pooling resources to invest in transport or processing operations, small scale cattle farmers can become more active participants in the marketing systems. They can buy their own truck and set up their own abattoir in their areas or municipalities can assist through building small abattoirs. The Nkonkobe Municipality set an abattoir in Fort Beafort but small scale farmers surrounding the small town are not utilising the opportunity. Furthermore, to achieve improved marketing efficiency, attention must be given to improvement of infrastructure and formulation new and amendment of marketing policies as well as institutional reforms to ease constraints on market involvement.
Extension officers can also play a role using the recent extension approach of participatory rural appraisal through discussing with farmers and empowering the farmers in identification of cattle marketing problems and solutions. Success of extension officers in livestock farming areas should be measured by the number and value of livestock sold. A mechanism which incorporates the marketing of animals in the informal markets should be in place, since one can postulate that improved extension will also result in higher output to this market. This can be an effective way of moving from traditional agriculture to commercial agriculture. Furthermore, this will improve service delivery, thereby accelerating marketing of cattle thus agricultural development.
The decentralization of livestock markets and the wider dissemination of well updated information to the small scale farmers by the government and other stakeholders involved in agriculture can play a role in improving small scale farmers' access to formal cattle markets. The provision of market information will strengthen farmers' negotiating ability during transactions with individual speculators and consequently prevent the possible exploitation of farmers by better-informed buyers.
An adoption of a market orientated production program, involving the timely
mating and weaning of herds, could vastly improve the market off-take of
animals. If buyers are able to provide a product characteristic in terms of
quantity, quality etc., the extension service can be able to advice farmers
based on the market demands. Well informed extension staff can play an important
role at livestock auctions by advising individual farmers on issues pertaining
to procedures, language used and the bidding system at auctions. The
frustrations often expressed by farmers and auctioneers can be overcome to a
large extent, thus creating an enabling environment for all participants.
Conclusions
Market opportunities for small scale cattle farmers do exist. The issues that
need to be addressed are practical in nature and would require a joint effort by
the government, small scale farmers, producer organizations and private sector
role players. There is need for government to provide extension officers with
the capacity, support and physical means to expose small scale farmers to
markets and by so doing, efficiency in production and marketing of cattle is
achieved and huge profits realized. It can be concluded that marketing of
livestock is probably one of the most complex policy issues to be addressed for
improving household food security in communal areas of the Eastern Cape Province
since livestock production is their main source of income.
References
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Received 17 June 2007; Accepted 29 August 2007; Published 5 September 2007