Smallholders Beef Cattle Commercialization in Southwest Ethiopia

In this study, the beef cattle markets in Southwest Ethiopia are analyzed based on a survey of 172 producers. The �rst part emphasized the characterization and commercialization of the beef cattle market in the study area. The second part is dedicated to identifying the factors affecting households’ participation in the beef cattle market using the Heckman two-step selection model. In the �ndings, the beef cattle market is characterized by the dominance of few traders, asymmetric information, lack of contract enforcement, lack of transparency among market actors, and poorly developed market infrastructure. There is very low net commercial off-take rate of cattle for smallholder farmers in the study area. The result from the Heckman two-step selection model revealed that having positive stock of cattle, better access to extension service & feed, and a better level of literacy enhanced market participation and sales volume. On the contrary, market participation and sales volume were negatively affected by cattle keeper’s age, non-livestock income, and poor road and health infrastructure. The study suggested that improving the market and health infrastructure, providing capacity building for producers, and improving access to feed could enhance the intensity of smallholder beef cattle market participation.


Introduction Background
As the global population grows from 7 billion in 2010 to a projected 9.8 billion in 2050, and incomes grow across the developing world, overall food demand is on course to increase by more than 50 percent, and demand for animal-based foods by nearly 70 percent (World Resources Institute, 2018). Projected increases in animal protein demand and consumption are likely to maintain livestock's position as one of the fastest growing sub-sectors in agriculture for the foreseeable future, particularly in low-income and emerging economies (Global Agenda for sustainable livestock, 2014). In emerging and developing economies, smallholder mixed crop-livestock systems are, and will remain, the main producers of ruminant products to 2050 (Herrero et al., 2014). Growing evidence indicated that the sustained increase in the consumption of animal proteins creates a host of new development opportunities to synergistically link smallholder livestock producers with the economic growth processes from which they have largely been excluded (Lubungu et al., 2016). To this effect, the diverse roles of livestock in developing and emerging countries create opportunities to meet nutrition, income, livelihood and ecosystem needs while mitigating livestock-related threats to human and environmental health (ILRI, 2019).
Livestock play a signi cant role in rural livelihoods and the economies of developing countries (Herrero et al., 2012). In Ethiopia, the livestock sector plays a vital role in the overall economic growth and development of the country. Approximately 85 percent of Ethiopia's population is rural-based, and livestock supports the livelihoods of about 80 percent of rural people (ILRI 2011). The livestock subsector contributes 16.5% the national GDP, 47% of the agricultural GDP, 15% of export earnings, and 30% of agricultural employment (Lamesegn, 2018). However, the current levels of contribution of the livestock subsector in Ethiopia, at either macro or micro level, is below potential (Gebremedhin et al. 2007). One of the reasons, among others, seems to be the ine cient livestock and livestock product market subjected to high margins, and poor marketing facilities. Under these conditions, producers have no incentives to improve the quality of their animal products through appropriate management practices. The bene ts from their productive activities are constrained by lengthy marketing processes, high transaction costs, the informal cattle trade, over-exploitation by brokers, weak and unfriendly linkages between the major marketing actors, and a lack of both market-oriented cattle production and modern cattle marketing channels (Hailemariam et al. 2009a). There is a need for a well-performing (e cient) marketing system which satiates consumer demand with the minimum margin between consumer and producer prices (Belay 2013).
If livestock is to be used as an engine for poverty reduction, it is essential that producers become marketorientated (Herrero et al., 2012). In Ethiopia, however, many smallholder farmers and pastoralists do not participate in the livestock market. Furthermore, for those smallholder farmers and pastoralists who participate in the market, the size of transaction (sale or purchase of cattle or shoats) is found to be very small (Asfaw and Jabbar, 2008). The lack of a market-oriented livestock production system has shadowed and demeaned the role it can play in the national economy (Tegegne et al. 2006). In a nutshell, investment in developing e cient value chains (including market development, service provision, adequate institutional support, etc.) should be high in the development agenda, to create incentives for smallholders to integrate in the market economy (Herrero et al., 2012).
In Ethiopia, livestock production plays a vital role in the rural economy. Livestock production is one of the essential components of livelihood and employment for rural households. Mixed livestock production system (crop with livestock), agro-pastoral, and pastoral production system dominantly practiced in the highland and lowland agro-ecological zones of Ethiopia. Despite high production potential, the bene t earned from livestock production is constrained by the traditional and low market-oriented production system, poor access to markets, poor market infrastructure, poor trader investment, low producers' participation in the livestock market, illegal cattle trade, and the lack of value addition activities. There is a need to assess whether and how the existing small-scale and pastoral livestock production systems can provide sustainable and adequate live animal supply, which can meet the demand for domestic consumption and for export markets (Asfaw and Jabbar, 2008). While constraints in the livestock marketing are frequently discussed (Gebrekiros et al., 2021;Solomon, 2020;Gedefaw, 2020;Negassa et al., 2011;Ayele et al., 2003), empirical evidence on the performance of the beef cattle commercialization is rare in the Bench-Sheko and Kaffa zones of southwest Ethiopia. This paper will illuminate how to meet the rapidly growing demand for livestock products through identi cation of the major constraints that hinder market participation and intensity of participation and through formulation of interventions necessary to promote market oriented livestock production system.

Study Area
This study was conducted in Bench-Sheko and Kaffa zone administrations in South-western Ethiopia. A considerable amount of the region is covered with tropical montane humid forests. Agricultural practices are the dominant livelihood source for the inhabitants. Enset and maize are the major staple foods in the region, and the two crops are mainly used for subsistence. Coffee is the major source of income. Similarly, livestock is the most worthy asset for households because they serve as insurance against a drought period and in meeting the other family emergency. Also, Livestock, particularly cattle, serve as the fount of social prestige among pastoralists.

Source and Data Requirements
Both primary and secondary sources of data were employed to meet the speci c objectives of this study. Primary data were collected by using questionnaires drafted for producers and focus group discussions with traders. Hence, two FGD were conducted with traders each consisting of ve members. Moreover, secondary data were obtained from organization records of each district's a trade and industry o ce and previous research works.

Sample Size and Method of Sampling
Sampling procedure A multistage sampling procedure was employed. In the rst stage, study sites were purposively selected based on livestock production potential. In the second stage, Bench-Sheko and Kaffa zone administrations were purposively selected based on livestock production potential and accessibility to the market center. In the third stage, two districts from the Bench-Sheko zone (North Bench district and Shaiy Bench district) and two districts from the Kaffa zone (Gewata district and Saylem district) were selected in consultation with the zone agricultural o ces. In the fourth stage, three kebeles from each district were purposively selected based on livestock production potential and accessibility to the market center. In the nal stage, respondents were randomly selected using a formula N>= 50 +8m: where N is the minimum required number of households, and m is the number of explanatory variables included in the analysis. For this study, 172 respondents were selected.

Method of Data Analysis
Data were analyzed using descriptive statistics, commercial off-take rate, and econometric analysis.
To compute the rate of commercialization, two types of off-takes are estimated for cattle produced in the study area. First, the gross commercial off-take rate, which is given as the total sales as a percentage of the average stock of a household is computed as (Asfaw and Jabbar, 2008): Grosscommercialoff− takerate = sales 0.5(openingstock + endingstock) *100 ( ) The gross commercial off-take involves animal sales and excludes other outgoings and incomings such as transfers, exchanges, gifts and purchases.
When the interest is in the number of livestock that actually leaves the livestock owners and enter the market for slaughter, other exchanges such as on-farm transfers, on-farm exchanges and on-farm slaughters need to be netted out for off-take computations. Thus, from the point of view of assessing the supply of live animals by the households to the market, net commercial off-take rather than gross commercial off-take is a more relevant parameter to be estimated (Asfaw and Jabbar, 2008). The net commercial off-take rate is given as follows: Netcommercialoff− takerate = sales − purchases 0.5(openingstock + endingstock) *100 The net commercial off-take could be negative for net buyers, zero for those whose sales and purchases are equal or for those who are not engaged in the market, and it is positive for net sellers. In general, the livestock producers can buy and/or sell beef cattle.
To identify the factors affecting the market participation decision of households, the Heckman two-step model used. Since participation in the beef cattle market represented by a binary variable, those who participate might not sale all their livestock, which implies that the decision to sell and the decision of how much to sell are two separate decisions. If both decisions are involved: participation and number of live animal sales, Heckman (1979) two-step estimation procedure is appropriate.
The rst stage of the Heckman model attempts to identify factors affecting market participation (a participation equation). This equation used to construct a selective term, known as "the Inverse Mills Ratio," which added to the second stage "outcome equation" that explains the factors affecting the quantity of marketed surplus. The inverse Mills ratio is a variable for controlling bias due to sample selection (Heckman, 1979). The second stage involves the Mills ratio to the quantity of marketed surplus equation and estimating the equation using Ordinary Least Squares (OLS).
The structure of the sample selection model consists of two systems of equations. The rst equation is the selection equation, which is de ned as: where d i * is a latent variable, γ is a Kx1 vector of parameters, z i is a 1xK row vector of observations onK exogenous variables and u i is a random disturbance. Together, (eqn 1) and (eqn 2) de ne what is called a latent variable model.

( )
The second equation is the linear model of interest. The ordinary least squares regression technique would be to estimate the effect of the program using the equation.
Where Y i an observable is random variable, βis an Mx1 vector of parameters, X i is a 1xM vector of exogenous variables, and є i is a random disturbance. Hence, Y i is the probability of market participation in the live animals market; which is a dummy variable assuming the value of 1 for market participants and 0 otherwise.
To estimate these models, Heckman has introduced the Heckman two-step estimator, which is as below Where the quantities λ = φ ( Ziγ ) Φ ( Ziγ ) are the inverse Mill's ratio evaluated at Ziγ. Φ (.) and (.) are the normal density and cumulative distribution functions, respectively. ρis the correlation between unobserved determinant and unobserved determinants, σϵis the standard deviation of єi. The coe cient on the inverse Mill's ratio will indicate if there is selection bias. If the coe cient of the "selectivity" term is signi cant, then the hypothesis that an unobserved selection process governs the participation equation is con rmed.

Conceptual framework
To commercialize the beef cattle sector in Ethiopia for a sustainable supply of beef cattle to the market, this study conceptualized that beef cattle commercialization is dependent on the relationship between sales volume (intensity of market participation) and their determinants. The relationship between the determinant (independent) variables and the dependent variable included in the study are illustrated in Fig. 1. Based on the demographic, economic, and institutional factors, the expected outcomes are: market oriented beef cattle production, sustained supply of beef cattle, and equitable share of income and pro t among market actors in the beef cattle sector.

Result And Discussion
Socioeconomic Characteristics of the Respondent Out of the total respondents, 95.35 percent were male-headed households and the remaining 4.65 percent of them were female-headed households. Regarding the marital status of the respondents, 90.12 percent of the respondents were married and the remaining 9.88 percent of them were single. Educational attainment was included in the analysis as a dummy variable with two levels: unable to read and write, and capable to read and write. More respondents were capable to read and write (68.60%). Regarding having access to extension service and feed, 71.51 percent of the respondents had access to extension, while 54.07 percent of them had access to feed. Having better access to agricultural extension service and feed appear to contribute greatly to market participation. On the other hand, out of the total respondents, only 16.20 percent of them had access to credit. Regarding age, the mean age of the respondents was 37.83 years old. Similarly, the average family size and animal rearing history of respondents in the area was 6.72 units and 8 years.

A) Market Concentration Index
The industry market structure is determined once the market concentration ratio for the biggest four rms is computed. According to Curtis and Irvine (2015), a high degree of concentration suggests market power and possible economies of scale. Kohls and Uhl (1985) denoted that a concentration ratio of 50 percent or more is an indication of a strongly oligopolistic industry, 33-50 percent a weak oligopoly, and less than that of a competitive industry. Compatible with our nding, Zekarias and Teshale (2015) found an oligopoly market structure for cattle in Moyale.

B) Price and standard Setting Mechanisms
The price of beef cattle is set by bargaining once both agents (buyers and sellers) participating in the market accepted an offer of agreement. The Colour of an animal, its body size, age of the animal, sex, and height were important undertakings during price negotiation. Similarly, seasonal variation (festive seasons) gives producers little leverage on price. Otherwise, looking for alternative marketplaces or dates is considered a way of bypassing an offer for a low price. In line with our ndings, Herbert et al (2008) found that expected carcass yield, carcass fat thickness and marbling, the color of fat (white was preferred to yellow fat), age of the animal (young was preferred to old), and sex (the castrated male was preferred to bull or female) were instrumental during price negotiation.
On the other ank, the quality of beef cattle is determined by eye appraisal. Good quality is characterized by the color of an animal (brown is preferred to black), its body size, age of the animal (young is preferred to old), sex (male is preferred to female animal), and its height (tall and medium animals are preferred to short) would be important indicators of good quality. In line with our ndings, the ndings by Hailemariam et al (2009a) revealed that, in all the livestock markets in Ethiopia, there is no objective standard for selling and buying animals except for the visual observation of animals in most of the markets. In their nding, they stated that in the absence of stringent and formal standards and requirements for quality characteristics, the market still considers and gives weight to some of the quality parameters than others (Ibid). Another research conducted by Herbert et al (2008) denoted that with no applicable standards for uniform grading of live animals or existence of weighing facilities, farmers (who most of the time are de cient in market information and negotiation skills) are disadvantaged price takers.

C) Entry Barriers
There were barriers to entry and exit in the beef cattle industry. Traders stated that capital requirement, knowledge of the local language, social relationship, and geographic cartel impeded entrance in primary and terminal markets. Accordingly, more than 93 percent of the respondents stated that capital was the major challenge to penetrate the livestock market. In line with this nding, the nding by Meshack (2015) denoted that capital inadequacy is one challenge faced by traders.
In accessing channels, the traders in the study area stated that developing a friendly rapport with traders at terminal markets much-in uenced entrance and sustainable supply of livestock. In other words, the sanctity of business in the study area rested on the social relationship producers built with traders, not on contractual agreements. In line with our ndings, the ndings by Legese et al (2014) denoted that the relationships between collectors versus small traders are based on trust and not contracts. Another nding by Herbert et al (2008) indicated that all livestock transactions examined were based on informal verbal contracts.
Geographic cartel forged in primary markets was another impediment for new entrants in the beef cattle industry. In this case of geographic sharing of the market, small traders usually take advantage of collectors' knowledge of the local language to prevent new entrants from encroaching into their selfclaimed market territory.

D) Information Asymmetry
There was no formal source of information for producers in the study area. Neighbors, brokers, and traders were the dominant sources of informal information. Regarding transparency, there was an imperfect exchange of information between producers and traders in the area. The lack of formal and upto-date information on price made cattle keepers rely on informal sources. In the absence of a perfect exchange of information, the market fails to function e ciently since the economic problem of 'how much to produce' and 'how much to supply' is determined by market information. Our nding accords with the nding of Hailemariam et al (2009b) who denoted that poor market information system development in pastoral areas tempted traders to keep it secretly to make use of the ignorance of their competitors. In the same vein, the nding by Phuong (2008) revealed that market price information from village middlemen was not reliable or usable since village middlemen were both the traders and providers of market information.

E) Major actors in the beef cattle market chain
In the livestock market chain, market actors classi ed into two categories as primary actors and secondary actors. Primary actors are agents who have direct in uence from production to consumption in the livestock market. Secondary actors, however, are those agents (people or organizations) who indirectly in uence livestock marketing in the study area.

COMMERCIALIZATION OF BEEF CATTLE
The summary of gross and net commercial off-take rates estimates for cattle are given in Table 4. The gross commercial off-take rate is obtained by dividing the total sales of live animals over one year period by the annual average stock. On the other hand, net commercial off-take rate is obtained by dividing the net sales of animals (total sales minus total purchases) over one year period by the annual average stock. The gross and net commercial off-take rates for cattle was 55.68 percent ad 18.21 percent, respectively.
More than half of the net commercial off-take rate involved male animals (56.30% for ox and 4.82% for bullock). However, for female animals (cow and heifer) the net commercial off-take were rates below 8%. Similarly, the net commercial off-take rate for calves was negative. Over all, the net commercial off-take rate for cattle implies there is lower rate of cattle commercialization in the study area.

Determinants of beef cattle Market Participation
Heckman's two step model used to analyse the factors affecting livestock keepers' market participation. The model chi-square test shows that the overall goodness of t of the model is statistically signi cant at less than 1%. This shows the explanatory variables included in the model jointly explain the level of market participation. distance to market, non-livestock income, access to market information and herd size. However, distance to market and non-livestock income negatively and signi cantly correlated with the intensity of market participation.

Inverse Mills Ratio
Inverse Mills Ratio (Lambda) or selectivity bias correction factor has affected the marketed surplus of beef cattle. There is sample selection bias implying the existence of some unobserved factors responsible for cattle keepers' the level of market participation. The negative sign of lambda shows unobserved factors negatively affecting both the participation decision and intensity of participation, justifying the appropriateness of the Heckman two-step selection model for identifying the determinants of beef cattle market participation and intensity of participation.
Negative rho for beef cattle indicated that the indirect correlation of unobserved factors with one another. Sigma = 4.6774685 represents the adjusted standard error for the level of market participation equation and the correlation coe cient between the unobserved factors in uencing decision into market participation and unobservable that determine participation level is given by rho = -0.99130.

Discussion
Selection model The regression result indicated that the age of the household head is negatively associated with the households' market participation. This implies young age is essential to commercialize beef cattle production since younger cattle keepers understand the marketing system better relative to their older counterparts. The marginal effect con rms that as age increases by one unit, holding other factors constant, the household's tendency to take part in the beef cattle market will decrease by 2.15 percent.
Our nding concurs with the nding of Barret (2007) who denoted that younger people actively took part in the market because they are more receptive to new ideas and are less risk-averse than their older counterparts. In the same vein, a nding by Kapimbi and Teweldemedhin (2012) denoted that as age increases, participation in marketing is reduced, which suggests that younger and middle-aged farmers tend to take part more actively in cattle marketing, understand the marketing system better, and have more energy to walk long distances. Contrary to our nding, a nding by Sebatta et al (2014) revealed that a farmer's age had a positive and signi cant impact on the decision to participate in the market.
Education attainment is positively associated with market participation. This implies higher educational attainment appears to enhance market participation. Conversely, the low levels of education of cattle keepers could lead to several market ine ciencies, which eventually affect the incentive from market participation. The marginal effect con rms that as educational attainment increases by one level, holding There was a positive association between herd size and the smallholders' beef cattle market participation. This implies the higher the number of livestock owned by households, the higher the tendency to take part in the beef cattle market. The marginal effect con rms that as herd size increases by one unit, holding other factors constant, the tendency of participation in the beef cattle market increases by 1.50 percent. Consistent with our ndings, Barrett et al (2007) found households with larger herd sizes have a higher ability to generate surplus animals and are, therefore, more likely to sell.
Likewise, Bellemare and Barrett (2006) denoted the positive in uence of herd size on the intensity of livestock market participation.
Distance to veterinary clinic negatively affected households' market participation for beef cattle at a less than 10% signi cance level. Holding other factors constant, the marginal effect con rms that one unit increase in the distance to veterinary clinic, the tendency of taking part in the beef cattle market decreases by 37.91 percent. The negative association between distance to veterinary clinic and market participation implied the essentials of accessibility to veterinary service in keeping a healthy and stable ock size. In line with our ndings, Zelalem et al (2012)  Access to market price information through informal sources was positively associated with the quantity sold. Keeping other factors constant, exposure to market price information is related to a 3.74 unit increase in the intensity of market participation (quantity sold). The implication is that market information increases the likelihood of beef cattle productivity, hence it leads to increased volume of sales. In line with this nding, Dlamini and Huang (2019) denoted that establishing intra and intercommunal communication networks enhances exposure to market information, implying an increase in the intensity of market participation.
There was a positive association between herd size and the intensity of market participation. This implies the higher the number of cattle owned by households, the higher is the intensity of market participation.
The result con rms that a one-unit increase in herd size in ates the number of beef cattle sold by 0.245 units, holding other factors constant. Consistent with our ndings, KibonaI and Yuejies (2021) indicated that as beef cattle herd size increased, the volume of beef cattle offered for sale also increased. In a similar vein, Dlamini & Huang (2019) indicated that the larger the beef cattle herd size, the more likely it is to enter the market by selling more beef cattle.
Moreover, earning non-livestock income relates to a decline in the beef cattle sales rate. In the meantime, cattle keepers with alternative income sources from crop sales reported having lower sales rates. Our nding is compatible with the ndings of Asfaw and Jabbar (2008) who found that off-farm income was negatively associated with the household's decision to participate in the livestock market as a seller.

Conclusion
The study revealed that there is very low net commercial off-take rate of cattle for smallholder farmers in Southwest Ethiopia. Furthermore, a large proportion of the beef cattle sold are aged that many of them are unlikely to meet the needs of wholesalers and meat export abattoirs. One of the reasons for the low net commercial off-take rate and limited market participation could be the high social value attached to cattle by pastoralists. Empirical estimate indicated that 51% of cattle keepers in this survey participated in the beef cattle market. However, market participation in the area are subjected to different factors such as age, herd size, proximity to market, frequency of extension, distance to veterinary clinic, and access to feed. Likewise, the market surplus of beef cattle is affected by proximity to market, non-livestock income, educational attainment, frequency of extension, and market information. The market structure, on the other hand, is characterized by imperfect competition implying that under the current production and marketing conditions, small-holder farmers and pastoral livestock production systems do not provide regular and adequate market supply of beef cattle at competitive price, which adversely affects the e ciency of the beef cattle market in the domestic and export markets. In a nutshell, it will be better to foster market oriented beef cattle production through improving the market and health infrastructure, providing capacity building for producers, and improving access to feed in the study area.   Conceptual Framework adopted from Kibona and Yuejie (2021)