Determinants of market participation decisions in small ruminants’ market by livestock keepers in Isiolo and Marsabit Districts, Kenya

J K Rutto, M O Odhiambo, E M Njuguna* and F M Murithi*

Department of Agricultural Economics and Resource Management, Moi University,
P.O. Box 3900, Eldoret, Kenya
jaminrutto@yahoo.com
* Kenya Agricultural Research Institute, P.O. Box 57811, Nairobi, Kenya

Abstract

Pastoral livestock, especially small ruminants will continue to provide a major contribution to the Kenyan economy for a long time to come. As population, urbanization and income growth increase, pastoral livestock keepers should be able to respond to potential increases in demand for livestock and livestock products by releasing small ruminants into the market. This study critically examines the sales decisions of the rural livestock keepers in the arid and semi-arid lands (ASALS) of Kenya by looking at the significant determinants of the market participation decisions in small ruminants market by the pastoral livestock keepers. The study was carried out in Isiolo and Marsabit Districts which are among the major sources of small ruminants destined for Nairobi markets. Data were collected by interviewing a sample of 250 livestock keepers through administration of structured questionnaires in July 2010. These were supplemented with secondary data from libraries, government offices and other relevant institutions.  

The results show that road conditions to the markets, price for small ruminants, group membership, cash relief, credit facilities and the herd size are the significant determinants of market participation decisions by livestock keepers. The study recommends that in order to increase participation of livestock keepers in the small ruminant market, it is imperative to improve the rural infrastructure, especially roads, promote diversification of activities in the ASALS and motivate pastoralists to be commercially oriented by focusing on investments that result in marketable surplus through increased production.

Keywords: pastoralists, probability, socioeconomic characteristics

Introduction

Small ruminants (sheep and goats) are a major component of the pastoral population’s household economy in Kenya (Njanja et al 2003). They are kept for both tangible (cash income, milk, meat and home consumption) and intangible (savings, insurance against emergencies, cultural and ceremonial purposes) benefits (Verbeek 2007). The current population of small ruminants in Kenya is estimated to be 27.7 million goats and 17.1 million sheep (Central Bureau of Stastitistics CBS 2009). 

Pastoralists keeping small ruminants are likely to benefit from potential increase in demand for animal food products which has been depicted to be rising sharply in many developing countries (Delgado et al 1999), if they respond positively by increasing participation in the market. Their efforts will probably be enhanced since small ruminants are relatively easy to keep; they reproduce quickly, spread the risk inherent in agricultural production (Ehui et al 2003) and can be used as a first step on the ladder out of poverty (Peacock 1995). 

Although pastoral livestock keepers are presumed to sell small ruminants, they have not fully exploited the potential demand for livestock and livestock products. An in-depth understanding on how best to strengthen small ruminant producers’ bargaining power at the markets and the steps required to achieve positive changes in market structures will definitely guide in improving their participation and increase the benefits gained from the markets. This study was designed to assess the determinants of sales decisions of pastoralists in Isiolo and Marsabit, the two districts which are a representative of the regions that supply small ruminants for meat to the Nairobi and Middle East markets. 

Materials and Methods

Sampling Procedures

Data were collected from a sample of 250 households in the larger Isiolo and Marsabit districts using geographical boundaries as a guide in selecting clusters (5 divisions per district) randomly. Systematic random sampling was used to pick respondents from the selected clusters/divisions. For each of the divisions, a list of households was obtained from chiefs/assistant chiefs and local elders. The households were picked randomly by establishing intervals created by dividing the total population of households in each of the divisions by the sample size required per division. In Marsabit, a total sample size of 150 households were selected and every kth household (N/30) was picked from the intervals created. In Isiolo, a sample size of 100 households was established and every k^th household (N/20) was picked from the list obtained per division.

Data types and sources

Data were obtained from primary and secondary sources.  Primary data comprised information on basic household and socioeconomic characteristics of livestock keepers. Secondary data were collected from public libraries and government institutions, journals, previous studies related to the study and annual agricultural reports. 

Data were analyzed using regression method with the aid of STATA version 9software.   Descriptive and non-parametric analyses were used to elicit the household characteristics and sale trends for small ruminants.

Estimation Procedure

The determinants of market participation in the small ruminant market were estimated using the probit model. Since the dependent variable is a qualitative dependent variable, that is, it estimates the probability of selling small ruminants, the probit model being a qualitative dependent variable model was appropriate to use for the analysis. The model is similar to the logit model except that it uses normal distribution (Moyo 2010). Probit model constrains the estimated probabilities to be between 0 and 1 and relaxes the constraint that the effect of the independent variable is constant across different predicted values of the dependent variable (Nagler 2002). The model assumes that while we only observe the values of 0 and 1 for the dependent variable, there is a latent, unobserved continuous variable that determines the value of the dependent variable. 

The decision to sell (the selection equation), specified in equation (1), was used to predict the probability that a given household will sell small ruminants and was estimated by maximum likelihood as an independent probit model from the entire sample of the livestock keepers who sell and those who do not sell. 

Pr (Z_i =1|w_i, α) = Φ(h(w_i , α)) + ε_i  ……………………………………………....(1)

Where Z_i is the dependent variable equal to unity for households that sell small ruminants zero otherwise, Φ is the standard normal cumulative distribution function, the w is a vector of factors affecting the decision to sell, the α is a vector of coefficients to be estimated, and ε_i is the error term assumed to be distributed normally with a mean of zero and a variance σ².  The variable Z_i takes the value of 1 if the marginal utility the household i gets from participating in market is greater than zero, and zero otherwise. From equation 1, then:

Z_i^* = α w_i + u_{i…………………………………………………………………………………………………..}(2)

where Z_i^* is the latent level of utility the household gets from selling small ruminants, u_i ~ N(0,1) and,

Z_i = 1 if Z_i^*> 0 ……………………………………………………………….. (3)

Z_i = 0 if Z_i^*≤ 0…………………………………………………………........... (4)

Results and Discussion

From Table 1, the households interviewed have an average size of 6.3 people with 88% of these households being male-headed with mean age of the household head being 46.7 years.

The education level of the household heads in the study area is quite low with an average of 4 years of formal education (Table 1). Households interviewed own an average herd size of about 20 tropical livestock units (TLUs). One TLU is equivalent to 0.7 camels, 1 cattle, 10 goats, or 11 sheep. About 41.6% of the households have members belonging to groups mostly self-help groups comprising women and youth. About 35.79% of the group members benefit from the groups in terms of savings. However, only 14% of the members cited marketing as the role that the groups play. This shows that marketing at the group level should be evaluated and necessary efforts taken to boost on their performance to improve marketing of livestock and livestock products. Goats are preferred by the livestock keepers because they can survive harsh climatic conditions, fetch higher prices and can be milked compared to sheep. The main reason for keeping sheep by the households was that they reach early maturity which results in quick multiplication. 

Distance from the major market is long with an average of 159 km. This explains why livestock keepers choose to sell their small ruminants mainly at the local markets which are located on average 10.4 km from the homesteads. Usually, small ruminants and other livestock are trekked to the markets. Most of the livestock keepers and traders are forced to travel long distances, sometimes up to about 100 km to find appropriate markets for their animals. These distances strain and exhaust their energy and thus discourage livestock keepers from looking for good markets for their animals.

Regression Analysis Results

Probit Results

Table 2 presents results of the Probit analysis of the determinants of market participation decisions by the livestock keepers in the market for small ruminants. The average price, road conditions to the market, cash relief, credit facilities and herd size are significant at 1% while group membership is significant at 5%, in determining decision to participate in the market.

Cash relief decreases the probability of selling small ruminants by 41%, all else held constant. Cash relief provides an alternative source of income for the livestock keepers to meet basic needs. Accessibility of credit facilities by the households has a positive significant effect on the probability to sell small ruminants. Access to credit by the households increased the probability of selling small ruminants by 24%, other factors held constant. Credit is a production-enhancing input which boosts productivity and consequently increases the level of surplus marketable output thus encouraging livestock keepers to sell small ruminants. 

Herd size had a positive significant effect with a unit increase in herd size increasing the probability of selling small ruminants by 1.3%, all other factors held constant. Households with larger small ruminant herds have a marketable surplus at their disposal and can readily sell their stock. This result discredits the common perception that livestock keepers prefer to cling to their livestock as a store of wealth even when they own large herds. The study results indicate that households that own larger herds are motivated to sell more in the markets.

The effect of the average price for smallstock determining market participation by pastoralists was found to be positive and significant. A unit increase in the price for smallstock increases the probability of selling small ruminants by 0.02%, all other factors held constant. This is consistent with a priori expectations and also the economic theory that price induces increased supply. Similar observations were made by Alene et al. (2008) and Komarek (2010). These results suggest that prices are an important driver of market entry for the small ruminant livestock keepers.

Group membership has a negative significant effect on market participation. Being a member to a pastoralist/women group decreases the probability of selling small ruminants by 17.7%, all else held constant. Only 14.7% of the households who are members of a group used their groups for marketing purposes while a higher proportion of 35.7% benefitted from their groups in terms of savings. The negative significant effect of group membership may imply that the savings derived by households from the groups discourages sale of small ruminants as households have alternative sources of income and hence do not need to dispose of small ruminants to acquire income to meet basic household needs. 

The road condition to the market has a negative significant effect on the probability of selling small ruminants. Over 80% of the livestock keepers in the region of study live in areas served by very poor roads or no roads. The bad condition of the roads decreased the probability of selling small ruminants by 49%, other factors held constant.  Road access is highly correlated with transport costs, thus, participation in the small ruminants’ market by the livestock keepers would be encouraged if the condition of the roads connecting pastoralists with the markets is better.

Conclusion

• Bad road conditions, cash and food relief have a negative influence on market participation therefore may hinder pastoralists from engaging with the market and benefiting from the rising demand for meat in the urban centers. Marginal changes in the average price for small ruminants is an incentive for livestock keepers to participate in the livestock markets.  Market players should ensure that some of the price benefits accrue to the small ruminant keepers to increase their likelihood of releasing more small ruminants to the market. Small ruminant keepers should be offered adequate information on credit access and utilization by government or Non-Governmental Organizations (NGOs) to increase their financial capital.

Acknowledgement

We appreciate the financial assistance by KARI/EU through the KASAL project, all the government officers in Isiolo and Marsabit for their assistance in data collection and the enumerators and the pastoralists who willingly cooperated during data collection.

References

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Received 15 December 2012; Accepted 4 February 2013; Published 1 March 2013

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