Competitive Smallholder Livestock in Botswana

Seminar at DAR- 26/02/2014

Dr. Sirak Bahta International Livestock Research Institute (ILRI)

Competitive Smallholder Livestock in Botswana: Outline

Introduction and motivation Research questions Objectives Partners and Collaborating

Institutions Work plan and research finding

Motivation

Botswana smallholder sector:

• produces most of Botswana’s meat • provides 70-80% of agricultural GDP • uses significant land and water resources

50-80 thousand smallholders own (most of the country’s) cattle 100,000 smallholders own sheep and goats

Motivation Cattle

• ave. <220 kg (even with 4-5 year oxen) • <50% calving rates • <20% off-take by the commercial export slaughter

sector • growing, multiple domestic market • promotion of specific production and marketing models • capacity-building initiatives

Sheep and goats… thought to…

• be of low productivity. • feature little value addition • have interactions with cattle

(at farm level, at input service level, amongst traders, in the retail meat market)

Motivation

A research project

Existing research:

• focused on exports

• focused on beef

• focused on production

This project aims to enhance the competitiveness of

smallholder livestock producers in Botswana

Research questions

• Who is the smallholder livestock producer, and what factors constrain his/her livelihood?

• How can livestock-related marketing systems be improved for the benefit of smallholders and the rural population?

Objectives

To better define smallholder livestock production systems, identify the factors affecting their productivity, and assess their competitiveness

To understand and improve conditions for market participation and value addition in markets for livestock, livestock products and inputs

To strengthen agricultural education and extension capacity.

Partners

ILRI - International livestock research institute

MOA, Botswana- Ministry of Agriculture Botswana

ACIAR- Australian Center for Agricultural research

Collaborating institutions

BIDPA- Botswana Institute for Development Policy

Analysis

Department of Agricultural Research

Department of Veterinary Sciences

BCA-Botswana College of Agriculture

Department of Agribusiness Promotion

Department of Agricultural Statistics

http://botswanalivestock.wordpress.com/

Late 2012

Consensus on competitiveness and factors

affecting it (Competitiveness workshop on

October 2012)

Understand competitiveness of smallholder livestock

Answer the questions:

1. What can be done to raise competitiveness?

2. Who should do it?

3. What partnerships are available to this project?

Major work plan items late 2012

Assess animal health problems, raise local

animal health capacity

• PE training in Serowe

• 25 extension officers trained on PE

• Blood and serum sample collection

• Survey on disease prevalence

• Majority of the sample are tested at BNVL

Major work plan items late 2012

Major work plan items late 2012

Objectives of the snapshot survey: • Characterize the value chain actors involved with

smallholder livestock production; • Evaluate marketing systems of smallholder livestock

keepers; • Compare results with the recent FAO study and

extend them to enterprise level; • Analyze product quality preferences and retail

consumer purchasing demand; • Identify possible policy interventions to enhance

livestock competitiveness.

Major work plan items late 2012

Initial data collection on Value Chain - Snap shot survey conducted in central district to understand the livestock value chain

Major work plan items late 2012

Livestock Producers

BMC/Abattoirs

Local

cooperation

Individual

farmers

Government

programs

Speculators/

Agents

Feedlots

Butcheries

Input suppliers

Supermarkets

Consumers domestic

market Consumers

external market

Provision of inputs such

as feed and drugs

Indicates the direct sell of livestock toconsumers and consumers obligatoryto kill the cattle in slaughter houses

Two way supply/demand of livestock

Export of high quality meat toforeign markets

.

..

Major market channels for cattle

Major market channels for small stock

Exports

Figure 1: Total cost per household, subdivided by number of animals held (Total Livestock Units)

Total costs subdivided by Herd size

Major work plan items late 2012

Figure 2:Gross margin by livestock herd size (Total Livestock Units)

Farmers’ discussion groups identified the following factors as constraints on financial performance:

Limited numbers of veterinary officers to provide sales permits Technical problems with the bolus, such as read errors and double insertion

Major work plan items late 2012

Problems restrict producers’ access to the export markets and promote the alternative, and usually lower-priced market channels for cattle. • BMC’s monopoly on cattle purchases, making it a local

price maker • Exploitation by agents/speculators Producers claim to be powerless as market decision-makers, particularly in the face of continuing costs when sales dates are uncertain. • Lack of awareness and information about the quality

requirements of the markets for beef and small stock, both live animals and meat, is a major problem

Major work plan items late 2012

Figure 3: Products’ attributes important for consumers

Consumers’ perception of meat quality

Major work plan items late 2012

Figure 4: Factors consumers look when they buy meat (Sellers Perspective)

Retailers’ perception of meat quality

Major work plan items late 2012

Results of Value chain analysis: System dynamics model

Livestock Keepers BMCSelling to BMC

(mixed grade catlle)

High Quality (prime, super, grade 1& 2) Meat Exported & Sold toDomestic High Quality Retialers

Feedlots

Cattle sold to feedlots orkept on farmers own feedlot

(weaner)

Selling High Quality Cattle(prime and super grade) to

BMC

Livestock Outflow for

Various reasons

(death, gift, stray,

theft, donation,

individuals, festivals,

etc.)

Lower Quality Meat

Sold in Domestic Market

Big Butcheries (Carcass

Distributor)

Selling to Big Butcheries

(cattle-all grades)

Small/Local

Butcheries

Selling to Small Butcheries(mostly old cattle, goat, and

sheep)

Lower Grade Meat

selling (cattle)

Selling to locals

Selling to Chain Stores &Hotels (Prime, super, grade

1 & 2)

Government

Programs

(cattle, goat,

and sheep)

Selling to Domestic

High Quality Retailers

Figure 5: Cattle market channels in Botswana

Figure 6: Portrayal of model structure

Scenario 1: Baseline scenario

• The model programmed to replicate the status quo of beef production and trade in Botswana

• Exports to the EEA (over 75% of export market share) are blocked for two years. Thus, demand from the export market declines by about 75% for two years based on lost access to the EEA markets, and then returns to normal.

• FMD outbreaks were programmed to occur randomly once each 7 years (based on historic outbreaks). The reported simulation introduced an FMD outbreak in week 98 (simulation time horizon is 260 weeks).

Scenario 2: Market liberalization

• Looks at the effect of market liberalization on the financial and productive performance of producers and other value chain actors.

• In addition to the existing domestic and export market channels, this policy targets exports of weaners to South Africa.

• This scenario introduced to look at controlled sales of weaners and how it might influence production and marketed volumes for different value chain actors.

• It evaluates the effect of exporting 2,000 weaners starting from week 52 (2,000 is a random initial value; the model endogenously calculates weaner prices).

• This scenario is motivated by the policy debate in Botswana on the positive and negative effects of removing BMC’s monopoly over beef export channels

Scenario 3: Baseline + FMD freedom

• This scenario, reports the results of a FMD-free scenario of cattle production and marketing.

• This scenario assumes a smooth flow of cattle to the export market without any disruption due to animal diseases outbreaks.

• This scenario is motivated by the fact that large scale FMD outbreaks and outbreaks in the EU export zones in Botswana, unlike small regional outbreaks, do not occur as frequently as outbreaks in FMD-endemic and FMD vaccinated zones

Scenario 4: Market liberalization +

FMD freedom

• This scenario tries to assess how FMD freedom combined with market liberalization will influence market dynamics within the beef value chain.

Value chain actors financial performance relative to baseline scenario

Scenarios Producers Feedlots BMC

Traditional

urban and

rural

butchers

Modern butchers

and retailers

Market

liberalizatio

n only 36% -3% -3% No change No change

FMD control

only 101% 21% 42% 10% 1%

Market

liberalizatio

n and FMD

control 172% 28% 36% 10% 1%

Producers cumulative profit

Feedlots cumulative profit

BMC cumulative revenue

Traditional urban and rural butchers

cumulative profit

Modern butchers and retailers cumulative

profit

• Without improved FMD control, liberalizing the monopoly power of BMC has little impact on producer market access in domestic and export market channels.

• Strategies that combine FMD control and market liberalization generate benefits for producers and other value chain actors.

• Investment in FMD control is not without cost:

– Marginal benefits in market access likely to be diminished by significant fixed and recurrent investments in disease surveillance, vaccination, and maintenance of FMD zones.

– This suggests that although partial market liberalization has potential benefits, other value-adding strategies need to be considered.

Results of Value chain analysis: System dynamics model

- Household survey

- A structured questionnaire was used to collect data.

- Data was collected in collaboration with BCA

- 15 enumerators and two BCA lecturers involved

- About 600 households are interviewed in 1 and ½ months

Major work plan items 2013

Major work plan items 2013

Data collected include detailed information on

- Costs and returns and production inputs such as feeds,

veterinary supplies and advisory services, labour and fixed

inputs.

- Cattle breeding method,

- Disease prevalence,

- Access to extension

- Market services

- Household socio demographic characteristics.

- Food security and risk information

Major work plan items 2013

Some of the research topics include:

• Market participation, commercial orientation and channel choice

• Animal health cost analysis

• Profit efficiency and competitiveness

• Technical efficiency

• Feed related research output

• Policy: trade and marketing

• Food security and other studies of interest to local partners

Major work plan items 2013-2014

Variables Mean

Value of beef Cattle output (Pula per year) 5955

Beef cattle price (Pula) 1993.04

Feed cost (Pula per year) 605.57

Vet. cost (Pula per year) 650.89

Labour Cost (Pula per Month) 237.78

Cost of other inputs (Pula per year) 350.5

Value of fixed capital (Pula) 131779.5

Crop land area (Hectares) 6.19

Family labour (hours per month) 210.34

Results: Descriptive statistics

38

Variables Mean

Age of household head (Years) 59.79

Education of Household head (years) 4.95

Household Off farm income (Pula per year) 54815.57

Distance to commonly used market(Km) 39.65

Herd size (Beef cattle equivalent) 23.86

Gender (% female farmers) 22%

Information access (Yes=1, No=2) 76.79%

FMD disease zone (Yes=1, No=2) 42.80%

Crop income (Yes=1, No=2) 50.03%

Results: Descriptive statistics

39

Results:Stochastic profit frontier estimates

Variables

OLS MLU

Coeff. t-values Coeff. t-values

Constant -34.87 -26.31 -38.12 -32.49

Ln (Average Beef cattle price) 5.01 28.23 5.51 34.85***

Ln (Feed prices) -0.15 -3.61 -0.13 -3.11***

Ln (Veterinary prices) -0.12 -2.97 -0.09 -2.46**

Ln (Labor prices.) 0.08 0.24 -0.79 -1.93**

Ln (fixed capital) -0.02 -0.64 0.02 0.53

Ln (Family labour Hrs) -0.06 0.28 0.46 1.82*

Ln (Crop land area) 0.55 2.95 0.28 1.70*

sigma-squared 7.87 6.03***

gamma 0.80 11.09***

log likely hood function -1129.60 -1093.43

LR test of the one-sided error 72.32

Results: Efficiency drivers

Variables Coefficient t-values

Constant -11.86 -2.47**

Age of household head -1.26 -3.44***

Education of Household head 0.043 0.14

Annual household non-farm income 0.26 2.64***

Distance market (commonly used) 0.56 2.42**

Herd size 2.48 4.92***

Gender (% female farmers) -2.82 -2.43***

Information access (Yes=1, No=0) 4.15 2.80***

FMD disease zone (Yes=1, No=0) -4.56 -3.84***

Crop income (Yes=1, No=0) -2.31 -2.94***

• Profit efficiency among farmers

Project outputs 2013-2014

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

HZ1

(Mean=0.58)

HZ2

(Mean=0.54)

HZ3

(Mean=0.48)

Pooled

(Mean=0.57)

Feeds work - Feed assessment in Botswana

• FEAST tool training to about 22 MOA staff • Feed assessment result will inform the composition of the diets that will be used at

• Feed trial (pen) – DAR, Exchange visit to Australia

• Feed trial (BMC):

• will look on technical economic efficiency of feedlots

• Include post slaughter performance indicators

• Analysis will be done in cooperation with BMC and

UNE (University of New England

Major work plan items 2014

Breeding activity

• Preliminary planning meetings held in Botswana by

Boni (Dec. 2013)

• Some element breed work will go into feed trials

• Boni will communicate specifics in Feb-March

during communications event

• Feed trial (BMC) will have breeding analysis

Major work plan items 2014

BIDPA’s deliverables

• Roles for Co-operatives in Enhancing Competitiveness of Smallholder Livestock in Botswana

• Public and Private Provision of Services to Smallholders: an examination of Livestock Advisory Centres

• Regional Trade Opportunities for Botswana’s Livestock Sector

• Policy Conference

Major work plan items 2014

Animal health

• PE survey results

• Refresher training in April

• Disease prevalence (test results) research outputs

Extension work

• Training need assessment

• CICE to lead

Major work plan items 2014

• A Survey of Smallholder Livestock Production in Central

District, Botswana Poster presented at 9-11 September,

Kampala, Uganda

• Smallholder market competitiveness for beef production in

Botswana: A quantitative value chain analysis Poster

presented at 9-11 September, Kampala, Uganda

• Measurement of competitiveness in smallholder livestock

systems and emerging policy advocacy: an application to

Botswana (Food policy Journal)

• Determinants of profit efficiency among smallholder beef

producers in Botswana (IFAMA June 16-17, 2014, Cape Town,

South Africa)

Project outputs 2013-2014

• Determinants of competitiveness of smallholder beef

producers in Botswana 25-27 June 2014 | Halle (Saale),

Germany

• An analysis of beef market liberalization in Botswana: A

quantitative value chain approach (IFAMA June 16-17, 2014,

Cape Town, South Africa)

Project outputs 2013-2014

Thank you!!