5.5 Structure and specifics of livestock trade and their implications

While livestock and agricultural marketing systems share some characteristics, a number of features unique to livestock products determine how their marketing will be carried out. Tables 5.2 and 5.3 illustrate some of these similarities and differences. In our discussion of livestock marketing characteristics, we will deal mainly with the marketing of meat, although dairy marketing will also be addressed.

Table 5.2. Comparison of animal and crop characteristics.

Factors	Animals	Crops
Evaluation of product	Difficult	Relatively easy
Grading system	Less standardised	More standardised
Market organisation	Less organised	Organised

Source: Amir and Knipscheer (1989: p. 147).

Table 5.3. Common marketing problems in the livestock sector.

		A problem about:
		Production inputs	Meat	Milk
Problems for livestock producers
	No market outlet	X		X
	Differential prices by location	X		X
	Place of sale too far from farm			X
	Difficulty of storing			X
	Low prices		X	X
	Purchaser exploiting seller		X	X
	Retailer exploiting producer	X
	Overproduction and surpluses		X	X
Problems for consumers
	High prices	X	X	X
	Unreliable supply	X		X
	Suspect quality end hygiene	X	X	X
	Poor consumers lack access to supply	X		X
Problems for producers and consumers
	Seasonal fluctuation, price and quantity		X	X
	Large margins between prices	X	X	X
	Market failure when drought		X	X
	Marketing system not responsive to changes in supply and demand	X	X	X

The characteristics of livestock producers hamper buying at the producer level - a level which is typified by many small producers. They are widely dispersed under traditional land tenure regimes using traditional management systems. Communication and infrastructure are limited and bargaining power is poor. A lack of market orientation often exists among producers, especially in pastoral areas, where cattle are not necessarily held for profit, thus changing the nature and timing of sales. These characteristics affect the number and type of traders, the types of services offered, the cost and type of transport system adopted, the location of market sale points and processing facilities, and the efficiency of information dissemination. One result of such conditions is the large role of the informal sector in livestock marketing, because of the costs incurred by large integrated efforts to market cattle. Facilities for assembling livestock are important, but often lacking, leading to informal trading.

Some marketing differences are brought about by the nature of the good itself. There is less processing involved in the marketing of livestock than with grains. Indeed sometimes no processing may occur until just before the products are to be sold at retail. Therefore, a larger share of the amount the consumer spends on meat is expended for the live animal. Thus, a greater proportion of the retail price goes to the producer. Livestock processing usually involves not only slaughter, but butchering and refrigeration as well. Because of the lack of refrigeration facilities, meat is stored for only a short period of time. Therefore, storage after processing is minimal. Meat marketing begins with the live animal which is transported or trekked to slaughtering facilities for processing to, at least, the carcass level. If transport opportunities are limited, slaughtering may only operate to sell fresh meat to the local market. The limited role of processing in livestock marketing is made up by the importance of transportation and its associated costs. In Africa, the limitations of road transport and the unreliability of refrigerated transport (either by road or rail), lead to most livestock being trekked to slaughter points. This has been shown to be relatively efficient, as will be discussed in more detail in the section on market evaluation.

At slaughter points, and at the carcass level, livestock are graded according to consumer preferences. Important characteristics for grading are fat levels, tenderness, age, and weight. Carcasses can be processed into either wholesale or retail cuts, in the former case serving yet another level of market intermediaries. If not processed into retail cuts, carcasses can be chilled and shipped to centralised butchering and distribution centres, where they are further processed into wholesale cuts, which at retail outlets are processed into retail cuts. More valuable cuts are distributed to higher-income retail areas, leading to product differentiation in the retail market. Slaughter and packing houses must comply with government sanitation regulations and be subject to inspection, which forms another part of the grading and standardisation process. Although export markets exist, disease regulations inhibit the movement of stock for export. Thus, such trade is usually limited and is handled by parastatals.

As the livestock market develops, the use of specialised skills and technologies increases, as does market integration. Market integration can reduce the risks that occur from price instability. The larger firms that result from integration can raise capital for improved plant and equipment and its more specialised management.

Box 5.2: Example of a livestock marketing system: West African markets for cattle and meat. There are three main sources of meat supply for the southern cities along the West African coast: · cattle and small ruminants from dry savannah areas (pastoral areas) · livestock from mixed farming areas · chilled, frozen and canned imported meat. Because tsetse occurs along the coast, producers are far to the north. As a result, the marketing structure has to be complex in order to move livestock over long distances to the consuming areas with minimum loss. Supply varies with the willingness of producers to sell, the quantity and quality of grazing at different seasons, and disruptions to the infrastructure such as broken bridges or restrictions on movement imposed by veterinary officials. The price for meat in Abidjan or other coastal cities may be twice as high as equivalent prices for cattle in the supply regions. Thus, prices which dominate the trade are the wholesale prices in the consuming towns on the coast - where the greatest aggregation of supply and demand are reflected. Marketing begins with local traders (country buyers) in the north who buy surplus cattle from migratory herders. Cattle are driven to village markets where some are bought by other traders to transport (in droves of 100-150 head) to the south by rail, truck or foot. The animals may be bought and sold several times before reaching their destination, with each trader specialising in a single stage of the market. This, using the best local knowledge and permitting rapid turnover of capital, thereby reduces risk. Along the journey, the cattle are fed and watered, weak animals are sold and all are inspected, dipped or vaccinated by veterinary officials. If travelling via official corridors, they are taxed at the frontiers. In the coastal towns, brokers or "landlords" put buyers in touch with sellers and provide some of the finance required to handle the cattle between arrival and the retail sale of the cuts. These landlords provide accommodation to the livestock sellers, arrange introductions and provide guarantees for payment at agreed prices. Most buyers are wholesalers, although some resell to subsidiary markets. Wholesalers sell carcasses to retail butchers, and sell hides and offal. The retail market is differentiated into low quality meat at low prices, marketed in low-income areas and high quality meat, sold in select shops in high-income areas. (Whetham, 1972).

Important points (5.4-5.5) · The four major elements of a marketing are: - product type - participants - physical infrastructure - policy institutional environment. · Marketing system functions are broadly categorised as: exchange functions, physical functions and facilitating functions · Actors in the market are defined by the roles they play. Major market agents/actors are. farmers, country buyers, wholesalers, commission agents and brokers. · Functions of the middlemen in the market are carried by four types of enterprises, namely, - locally-based private enterprises - co-operatives - marketing boards and other state enterprises - transnational companies. · Goods in a market pass from producer to consumer through a variety of channels. · Livestock marketing systems differ from agricultural marketing systems in terms of product procurement, processing, grading and transportation. Markets for livestock products are less organised than crop markets.