Tanzania Livestock Sector Analysis: Livestock Production & Household Economy
Livestock Sector Policy Analysis
Transcript of Livestock Sector Policy Analysis
ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE
Livestock Sector Policy Analysis Using an Economy-Wide Model for Ethiopia
AuthorsAyele Gelan, ILRIErmias Engeda, IFPRI ESSP-IIA. Stefano Caria, DRMFSS
Ethiopian Economic Association ConferenceJuly 21, 2011Addis Ababa
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LIVESTOCK’S IMPORTANT ROLE IN THE ECONOMY
• Livestock’s macro role in production often not emphasized• Growing demand for meat• Forward linkages: draft power, manure• Backward linkages: feed• Livestock products and agro-processing
• How high are macro linkages from livestock sector growth?• How much income growth and poverty reduction can we generate
with livestock sector growth?• General equilibrium analysis needed to capture these
PREVIOUS WORK EMPHASIZES ROLE OF CEREALS
• CAADP limited initial recognition of role of livestock sector
• Diao Pratt (08) conclude that “growth in staples is the priority for poverty reduction”• Combining growth in staples and livestock has high economic multipliers &
strong poverty reduction gains in food deficit areas
• Dorosh and Thurlow (09)’s poverty-growth elasticities• cereals have highest rural poverty reduction potential
APPROACHES OF PRESENT WORK• Developing a herd dynamic module • Coupling the herd dynamics with the economy-wide
model • Nesting the biological and the economic processes• Establishing stock-flow relationships in existing
economy-wide models (e.g. livestock as capital and livestock products)
• Revising and improving the system of economic accounts in existing models (e.g., draft power as capital in cropping, breeding stocks as capital in livestock, etc)12
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Young female
Sale of live animals
costs of keeping young animals
+ +
SCHEMATIC REPRESENTATION OF HERD DYNAMICS AND PRODUCTIVITY
Production and economic flows (off-take, in-takes and others) Reproduction and growth (growth, births, deaths)
Immature female
Mature female
Births
Young male
Immature male
Off-takes
Sales of products
=
=
Yields/animal
+
TR
Other economic
uses
+
Mature male
costs of keeping immature animals
costs of keeping mature animals
Female deaths
Male Deaths
TC
-
=
Gross margin
Condensed and adapted SAM for Ethiopia(ETH birr million, 2005)
AEZ-1 AEZ-2 AEZ-3 AEZ-4 AEZ-5 P-1 P-2 P-3 Nag FDD Inv Ex Total
Livestock activities by AEZs
AEZ-1 114 6 71 191AEZ-2 5553 173 1907 7632AEZ-3 983 25 754 1762AEZ-4 3372 124 942 4437AEZ-5 745 17 3205 3967
Livestock products
Live animals (P-1) 940 7268 2229 701 11138
Poultry (P-2) 32 316 -6 27 369
Milk (P-3) 430 6990 0 52 7473
Non-agri 4 164 38 96 86 99
Factors Labor 128 5155 1184 2990 2671 Land 59 2313 540 1352 1210
Taxes 365 20 428 Imports 6 5 67 79 Total 191 7632 1762 4437 3967 11138 369 7473 1402 14574 2223 780
The model and simulations
Dynamic CGE model for Ethiopia
• We use Dorosh and Thurlow’s 09 model ˃ General equilibrium: the model represents different
markets, all reaching equilibrium˃ Dynamic: the model is solved recursively
• Model is calibrated for Ethiopia using 2005/06 EDRI Social Accounting Matrix˃ 5 AEZs, 97 activities, 66 commodities, 27 factors
Closures• Factor closures:• Labour , livestock and land fully employed and mobile• Capital fully employed and activity specific
• Macro closures• Marginal propensity to save is fixed, investment adjusts• Tax rate fixed, government savings adjusts• Foreign savings fixed, exchange rate is flexible
Simulate realistic TFP shocks…• We simulate Total
Factor Productivity (TFP) shocks to various subsectors
• Base growth follows 98-07 trend
• Additional shocks as in Dorosh Thurlow 2009˃ Obtained in discussions with
MoA and CAADP
Simulation Shocks
BASE All Ag commodities grow at 98-07 trend
CEREAL Cereals + enset grow faster
CASH CROP Cash crops and pulses grow faster
LIVESTOCK Livestock activities grow faster
CAADP All Ag commodities grow faster
…different across sub-sectors
CEREA
L
CASH CROP
LIVES
TOCK
10,000
12,000
14,000
16,000
18,000
20,000
22,000
Size of sub-sector in 2005
Mill
ion
Birr
Cereal only
Cash crop only
Livestock only
0.0% 1.0% 2.0% 3.0% 4.0% 5.0%
2.2%
0.6%
0.5%
4.3%
2.4%
3.1%
Weighted average of TFP shocks to subsectors
Accerelated BasePercentage
Results
Agricultural GDP 2006-2015
2006 2007 2008 2009 2010 2011 2012 2013 2014 201560000
65000
70000
75000
80000
85000
90000
Base Cereal onlyCash crop only Livestock only
Mill
ion
Birr
Stronger linkages for livestock & cash crops
Sub-sector Ag sector GDP GDPBASE 3.7% 6.4%CEREAL 6.4% 4.6% 6.6%CASH CROP 4.1% 4.2% 6.5%LIVESTOCK 5.5% 4.5% 6.7%CAADP 5.9% 7.0%
Average growth rates 2009-15
• CEREAL has highest sub-sector growth
• But comparable Ag sector and GDP growth
• A 1 pct point of CEREAL sector growth impacts Ag sector (and overall GDP) less than growth in LIVESTOCK and MARKET
Different economic linkages at work
Livestock has good export performance
1%
84%
15%
Shares of agricultural export value
CEREAL
CASH CROP
LIVESTOCK
BASE
CEREAL
CASH CROP
LIVEST
OCK9.5%9.6%9.7%9.8%9.9%
10.0%10.1%10.2%10.3%10.4%10.5% -1.0%
-0.9%-0.8%-0.7%-0.6%-0.5%-0.4%-0.3%-0.2%-0.1%0.0%
2005-15 % change in total export and real exchange
rate
Export pct changeReal EXR pct change (right axis)
Perc
enta
ge
Perc
enta
ge
Livestock raises income from labor and land the most
humid lowland
humid cereal
humid enset
drought prone
pastoralist
0% 20% 40% 60% 80% 100%
Factor income of the poor
Land Labour Livestock
Labour
Land
Livestock
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
% increase 2009-15 in factor income: poor HH
LIVESTOCK CASH CROPCEREAL
Percentage
Price effects strengthen CEREAL effect on consumption poverty
• The evolution of poor HHs consumption similar for each simulation
• Price effects more than compensate lower income effect of CEREAL˃ Cereals about 25pct of whole
consumption basket˃ Rural poor HHs consumption
thus grows faster
BASE
CEREAL
CASH CROPS
LIVESTOCK
0.00% 1.00% 2.00% 3.00% 4.00% 5.00%
3.58%
4.36%
3.89%
4.02%
Average growth rate 2009-15 of rural poor HHs food consumption
Percentage
Conclusions
Livestock’s re-casted role• Livestock has important economic linkages
• Especially when taking into account complementarities with crop production due to draft power
• Livestock growth increases the incomes of the poor expanding incomes from labor and land
• Livestock limited role in consumption limits its consumption poverty reduction potential• This may be moderated in the future
FUTURE EXTENSIONS• By far the most important extension (in both
modelling contexts) - strengthening crop-livestock interactions (e.g. crop residue)
• From social accounting to environmental accounting (i.e., a third level nesting: biological => economic => environment)
• Livestock-environment interactions
• Livestock-demographic-economic relationships (the livestock revolution story)
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