ISBN 92–9146–396–5

Livestock and Irrigation Value chains for Ethiopian Smallholders

Livestock and irrigation value chains for Ethiopian smallholders project aims to improve the competitiveness,
sustainability and equity of value chains for selected high‐value livestock and irrigated crop commodities
in target areas of four regions of Ethiopia. It identifies, targets and promotes improved technologies and
innovations to develop high value livestock and irrigated crop value chains; it improves the capacities of
value chain actors; it improves the use of knowledge at different levels; it generates knowledge through
action‐oriented research; and it promotes and disseminates good practices. Project carried out with the
financial support of the Government of Canada provided through Foreign Affairs, Trade and Development
Canada (DFATD). lives-ethiopia.org
The International Livestock Research Institute (ILRI) works to improve food security and reduce
poverty in developing countries through research for better and more sustainable use of livestock.
ILRI is a member of the CGIAR Consortium, a global research partnership of 15 centres working
with many partners for a food-secure future. ILRI has two main campuses in East Africa and other
hubs in East, West and southern Africa and South, Southeast and East Asia. ilri.org
The International Water Management Institute (IWMI) is a non-profit, scientific research organization
focusing on the sustainable use of water and land resources in developing countries. It is headquartered
in Colombo, Sri Lanka, with regional offices across Asia and Africa. IWMI works in partnership with
governments, civil society and the private sector to develop scalable agricultural water management
solutions that have a real impact on poverty reduction, food security and ecosystem health. IWMI is
a member of CGIAR, a global research partnership for a food-secure future. iwmi.org
CGIAR is a global agricultural research partnership for a food-secure future. Its science is carried
out by15 research centres that are members of the CGIAR Consortium in collaboration with
hundreds of partner organizations. cgiar.org

EIAR

LIVES WORKING PAPER 2

Factors determining household
market participation in small
ruminant production in the
highlands of Ethiopia

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

Factors determining household market
participation in small ruminant production in
the highlands of Ethiopia

Berhanu Gebremedhin,* Dirk Hoekstra, Azage Tegegne, Kaleb Shiferaw and Aklilu Bogale

International Livestock Research Institute (ILRI), Addis Ababa, Ethiopia

* Corresponding author: b.gebremedhin@cgiar.org

March 2015

i

ii

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

© 2015 International Livestock Research Institute (ILRI)

This publication is copyrighted by the International Livestock Research Institute (ILRI). It is licensed for use under the
Creative Commons Attribution-Noncommercial-Share Alike 3.0 Unported Licence. To view this licence, visit http://
creativecommons.org/licenses/by-nc-sa/3.0/. Unless otherwise noted, you are free to copy, duplicate or reproduce,
and distribute, display, or transmit any part of this publication or portions thereof without permission, and to make translations,
adaptations, or other derivative works under the following conditions:
ATTRIBUTION. The work must be attributed, but not in any way that suggests endorsement by ILRI or the author(s).
NON-COMMERCIAL. This work may not be used for commercial purposes.
SHARE ALIKE. If this work is altered, transformed, or built upon, the resulting work must be distributed only under the
same or similar licence to this one.
	
	
	

NOTICE:
For any reuse or distribution, the licence terms of this work must be made clear to others.
Any of the above conditions can be waived if permission is obtained from the copyright holder.
Nothing in this licence impairs or restricts the author’s moral rights.
Fair dealing and other rights are in no way affected by the above.	
The parts used must not misrepresent the meaning of the publication.
ILRI would appreciate being sent a copy of any materials in which text, photos etc. have been used.

Editing, design and layout—ILRI Editorial and Publishing Services, Addis Ababa, Ethiopia.

Cover photo—ILRI/Gerard, Zerihun Sewenet, Apollo Habtamu

ISBN: 92–9146–396–5

Citation: Gebremedhin, B., Hoekstra, D., Tegegne, A., Shiferaw, K. and Bogale, A. 2015. Factors determining household market participation in small ruminant
production in the highlands of Ethiopia. LIVES Working Paper 2. Nairobi, Kenya: International Livestock Research Institute.

iii

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

Contents
Tables																	
iv
Abstract																
v
1	
Introduction														
1
2	
Conceptual framework													
3
3	

Empirical models and methods 												

4

	3.1	
Empirical model													
4
	3.2	
Methods														
4
4	
Results															
6
	

4.1	 Analysis of descriptive information											

6

	

4.2	 Econometric analysis results 											

11

5	

Conclusions and implications 												

20

References																
23

iv

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

Tables
Table 1. Ownership structure across those who own small ruminants (N = 2634) 						

6

Table 2. Proportion of households who own the type of animal (%) (N = 2634)						

7

Table 3. Commercial off-take rates and death rates by type of animal								

7

Table 4. Reasons of selling (% of owning households, selling households, and number of sales)				

9

Table 5. Farmers’ reasons of buying small ruminants (% of owning households, buying
households, and number of purchases)											

9

Table 6. Market places of sale by type of animal (% of sales)									

10

Table 7. Type of buyers by type of animals (% of buyers)										

11

Table 8. Descriptive values of variables included in the regression models							

11

Table 9. Bivariate regression results for selling and buying									

12

Table 10. Marginal effects of the bivariate regression equation									

14

Table 11. Ordered probit regression results for market position of households						

15

Table 12. Marginal effect results for market position of households								

16

Table 13. Multinomial probit regression results for market participation regimes of households				

17

Table 14. Marginal effects for market participation regime of households							

18

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

v

Abstract
Small ruminants, which account for more than half of the domesticated ruminants in the world, are an important
component of the farming systems in most developing countries. Despite their economic and social importance, socioeconomic and marketing research on small ruminants has so far been limited, a fact which also holds strongly true
in Ethiopia. This study, based on survey data of 5004 Ethiopian smallholder households, uses analysis of descriptive
information and econometric analysis to draw implications to promote market orientation. Econometric results are
based on estimation of bivariate, ordinal, and multinomial probit models. We find that herd size, herd structure,
access to livestock market, and involvement in the institutional services of extension and credit stand out as the
most important factors affecting market participation behaviour of households. Our results imply that an effective
package of interventions to promote market-oriented small ruminant production will need to include development of
livestock market infrastructure and market institutions, improved access to extension and credit use, efficient animal
reproduction and management, and proper animal health care.
Keywords: Small ruminants, market participation, Ethiopia, multivariate probit models

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

1

1	Introduction
Small ruminants, which account for more than half of the domesticated ruminants in the world, are an important
component of the farming systems in most developing countries (Kosgey 2004; Tedeschi et al. 2011). Between
1961 and 2006, the global population of small ruminants increased from 1.35 billion to 1.94 billion (Tedeschi et al.
2011). Since they require less investment compared to large ruminants, small ruminants are more suitable livelihood
strategies for resource poor households, and particularly for women who are often the most vulnerable members
of society in the developing world. In the crop–livestock mixed farming systems small ruminants are considered as
diversification strategy to cushion market and climatic risks and optimize the use of available resources (Oluwatayo
and Oluwatayo 2012).
Sheep and goats have high adaptive capacities to survive and produce in difficult environments which make them even
more appropriate component in the face of climate change and adaptation strategies for smallholder farmers (Gizaw
et al. 2010). For the rural part of most developing countries that are characterized by widespread poverty, inadequate
access to financial markets, with ever decreasing land holding and recurring natural shocks, small ruminant production
offers an alternative livelihood option. The short reproductive cycle of small ruminants allows quick stock recovery
after losses due to droughts or diseases. Because of the ease to liquidate small ruminants at times of household cash
needs, small ruminants are sometimes dubbed as ‘village banks’. Despite their social and economic role, however,
production and marketing research on small ruminants is limited (Tedeschi et al. 2011).
Ethiopia is one of the African countries with the largest small ruminant population in the continent (Abebe 2013).
Recent estimate indicates that there are about 27.35 million sheep and 28.16 million goats in the country (CSA 2014).
Almost all of the small ruminant population is comprised of local breeds. The CSA data further indicate that of those
who own sheep or goat about 64% and 58% own less than five heads of sheep and goats, respectively. Gezahegn et
al (2006) posit that small ruminants play a major role in the livelihoods of smallholders in the mixed crop–livestock
systems of the highlands of Ethiopia. However, the same study underlined that there was little strategic production of
livestock for marketing except for some sales targeted at Ethiopian festivals.
Despite the importance of small ruminants in the livelihoods of rural households, the current productivity of goats
and sheep in developing countries remains low, mainly because of under-feeding, poor management and diseases. In
Ethiopia, traditional small ruminant production technologies and practices render the productivity of the subsector
low (Gizaw 2010). This means considerable increase in animal productivity and production can be achieved with
improved technology and management practices.
Promoting market orientation in small ruminant production requires an understanding of why farmers opt to stay out
of markets and the constraints they face in market participation.1 Market orientation is likely to facilitate the adoption
of improved technologies and practices, thus helping households to increase marketable surplus, with the resultant
expected higher level market participation (von Braun et al. 1994; Gebremedhin et al. 2006; Barret 2008).

1  We define market orientation as agricultural production systems where most of the produce is targeted for sales and production decisions are
based on market signals. Market participation refers to the actual involvement of producers as sellers in the output market.

2

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

Hence, analysis of household market participation is fundamental to transforming small ruminant production in
developing countries. Such an analysis is particularly important in Ethiopia due to the large population size of the
animals.
This paper is aimed at analysing the market participation behaviour of small ruminant producers in the mixed crop–
livestock systems of the Ethiopian highlands. Based on analysis of descriptive information, and econometric analysis
of the determinants of household participation in selling and buying small ruminants, market position of households
(net seller, autarkic and net buyers), and market participation regimes of households (non-seller non-buyer, seller
only, buyer only, and seller and buyer), the paper attempts to draw implication to improve market orientation and
participation of small ruminant producers. In particular, the paper analyses the roles of herd size and herd structure,
and institutional services in promoting market participation of households in small ruminants. Results are based on
analysis of data from a survey of 5004 smallholder households in the highlands of Ethiopia conducted in 2014.
The paper is organized as follows. The following section presents the conceptual framework of the study, followed in
section three by methods of the study. Section four discusses results of descriptive and econometric analysis. The last
section concludes the paper and draws implications.

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

3

2	 Conceptual framework
The conceptual framework followed in this paper is based on the theoretical framework developed by Boughton et al.
(2007) and Barret (2008). The key features of the models are that farm households access to markets are not uniform
because households face differential transaction costs due to household and farm specific characteristics as well as
meso-level factors related to spatial differences in costs of commerce and degree of competition among market
intermediaries. Hence, the core issues in the models are the effect of asset endowments and access to physical and
institutional infrastructure.
The question of what interventions are required to break smallholders in developing countries out of the semisubsistence poverty trap that locks them up in the vicious circle of poverty and low productivity lies at the heart of
agricultural and rural development policy of these countries (Barret 2008). Underlying this broad policy issue is the
subsidiary question of how to improve smallholder market participation and facilitate their transformation from semisubsistence into market orientation (Gebremedhin and Jaleta 2012). Market participation is important because of the
static welfare effects of engagement in transactions due to specialization and comparative advantages, as well as from
the opportunities of larger-scale production in the face of non-trivial fixed and sunk costs of production and marketing
(Romer 1994).
The low level equilibrium poverty trap that predominates many farm households in many developing countries is
associated with semi-subsistence production using rudimentary production technologies and limited assets, reinforced
by weak access to physical and institutional infrastructure, and the resultant limited participation in profitable markets
(Barret 2008). Market participation of smallholders is both a consequence as much as cause of development, and
just ‘getting prices right’ may not induce broad-based, welfare-enhancing market participation, as farm households
need to have access to productive assets and improved technologies to produce surplus to the market and generate
reasonable return to their investment (Barret 2008). Micro- or meso-level interventions that shift productivity or
demand or local-level transaction costs are needed to generate behavioural or welfare effects. Access to adequate
assets and improved technologies that enhance productivity, and access to infrastructural and institutional services
that reduce production and marketing costs are necessary for smallholder’s active engagement in markets.
Hence, the focus of this analysis is on herd size and herd structure (crucial asset bases for market participation in small
ruminants), and access to physical and institutional infrastructure. Although asset endowments have been recognized
as important determinants of market participation, systematic analysis of the relationship between asset holdings and
market participation is limited (Boughton et al. 2007). We have not been able to control for variations in technologies
since production technologies in small ruminants are basically traditional and uniform throughout the study area.

4

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

3	 Empirical models and methods
3.1	 Empirical model
Our specification of empirical models is based on the conceptual framework described in the previous section and is
divided into three (1) the determinants of market participation of households as sellers and buyers of small ruminants,
(2) the determinants of market position of households (net sellers, autarkic and net buyers) and (3) the determinants
of market participation regime of households (non-seller non-buyer, seller only, buyer only, and seller and buyer).
The focus of our analysis is on the effect of herd structure and size, and access to services. However, to minimize the
bias in estimating the marginal effect of these variables, we also control for several household and community level
variables. Hence, each of our dependent variables of interest is modelled as a function of household characteristics
(age, sex and education of household head, household size, and household dependency ratio), household assets (land,
labour supply, wealth, cash income, and ownership of mobile), herd characteristics (herd size, proportion of female
animals in the herd, number of dead animals in the year), access to physical infrastructure (distance from household
homestead to nearest livestock market, and all weather road), household access to extension and credit services
(distance from household homestead to farmer training centre or development agent post, whether household
received extension advice/training on improved livestock production the previous year, and whether household had
obtained credit during the previous year) and community level variable (population density).

3.2	Methods
Data sources
Results are based on analysis of data from a survey 5004 smallholder households and 497 rural Kebeles2 in the four
highland regions of Ethiopia (Tigray, Amhara, Oromia, and Southern Nations, Nationalities and Peoples (SNNP)
regions). Ten zones were selected for the study from which 72 districts were further identified. The study area
accounts for about 13.6% of the national area, 30% of the national3 sheep population, and 22.5% of the national goat
population. For sampling purposes, the study districts were stratified into 10 agro-ecologies, and farm households
were selected randomly based on proportional to size sampling technique. Data were collected on household
characteristics; household asset ownership; farm characteristics including land holding, herd size and structure; access
to physical and institutional infrastructure; and cash earning of household. Survey was conducted in 2014 and referred
to the 2012/2013 production season.

2  A kebele is the lowest adminstrative unite in Ethiopia and comprises of 4-5 villages.
3  The national figures used to compute these percentages exclude the lowland non-sedentary zones of the Afar and Somali regions.

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

5

Econometric approach
The econometric models used depend on the nature of the dependent variables. The dependent variables used
in this analysis are household participation in small ruminant markets as seller and as buyer (bivariate outcome);
household market participation position as net seller, autarkic and net buyer (ordinal outcome); and household
market participation regime as non-seller non-buyer, seller only, buyer only, and buyer and seller (multinomial
outcome), during the study year. The choice between using separate probit models or a bivariate probit model to
analyse the determinants of household market participation decision as buyer and as seller is an empirical question.
Descriptive analysis of the buying and selling data show that more than 5% of households that participated in the
small ruminant market participated both as buyers and sellers. Bivariate probit model estimation results also show
a significant correlation between the two binary outcomes. Hence, we used bivariate probit model to analyse the
determinants of household participation in selling and buying small ruminants. An order probit model was used to
analyse the determinants of household market participation position since the outcomes are ordinal, while multinomial
probit model was used to analyse the determinants of household market participation status, since the outcomes are
choices without any order attached to them. Involvement in extension and use of credit are potentially endogenous
variables, since they can be related systematically to household or farm characteristics. To control for these potential
endogeneity, we use lagged value of these variables.

6

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

4	Results
4.1	 Analysis of descriptive information
Small ruminant ownership
Table 1 presents the samll ruminant ownership structure. Among the surveyed households, 52.6% of them own small
ruminants, with an average ownership size of 7.8 heads, split into 4.7 heads of sheep and 3.1 heads of goats. The
sheep stock structure shows that about 48.9% of the sheep stock is accounted for by ewes, followed by lambs which
account for 34.1%. Mature male sheep (rams and castrated sheep) account for only 17%. The goat stock structure also
shows that about 48.4% of the goat flock is accounted for by does, followed by goat kids which account for 32.2%.
Mature male goats account for only 19.4%. In terms of the total small ruminant stock structure, ewes account for
29.5%, followed by lambs which account for about 20.5%. Does account for about 19.2%. This herd structure clearly
shows breeding stock dominate the herds.
Table 1. Ownership structure across those who own small ruminants (N = 2634)
Type of animal

Mean ownership (SE)

% of flock (by sheep and goats)

% of flock (by total)

Ewe
Lamb

2.3 (0.05969)
1.6 (0.04943)

48.9
34.1

29.5

Mature male sheep

0.8 (0.03011)

17.0

10.3

Doe

1.5 (0.05850)

48.4

19.2

Goat kid

1.0 (0.04552)

32.2

12.8

Mature male goats

0.6 (0.02742)

19.4

7.7

20.5

About 57.8% of small ruminant producers produce only sheep and about 28.1% produce only goats. Just about 14% of
producers produce both sheep and goats. Because of the highland nature of the study area, sheep appear to be owned
by a higher percentage of households than goats. The results also show that sheep and goat production are, in most
parts, separate enterprises. Moreover, 52.5% of small ruminant producers rear sheep only with cattle, while 26.3%
produce goats only with cattle. Almost all the households who own both sheep and goat also produce cattle. Only
5.3% of small ruminant owners rear only sheep (without cattle or goats) and 1.8% rear only goats (without cattle and
sheep). These results indicate that small ruminant production is conducted jointly with cattle rearing.
The proportion of small ruminant producers who own the types of animals is given in Table 2. About 66.2% of small
ruminant producers own ewes, 36.1% own does, while 45% own lambs. About 39% of small ruminant owners own
does. Mature male sheep (castrated and un-castrated) are owned by 38% of the producers, while mature male goats
are owned by 23.7% of small ruminant producers. This structure of stock also mirrors the primary reproduction
objective of producers.

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

7

Table 2. Proportion of households who own the type of animal (%) (N = 2634)
Type of animal

%

Ewe
Lamb
Mature male sheep
Doe
Goat kid
Mature male goats

66.2
45.0
38.0
39.0
26.8
23.7

Among the sheep producers, only 7.8% did not have ewes in the stock, while among goat producers, only 7.4% did
not have does, reinforcing the result that reproductive female animals are essential components of the small ruminant
stock. On the other hand, among sheep producers about 47.1% of them did not have rams, and among goat producers
about 43.6% did not have bucks, suggesting that significant number of small ruminant producers depend on other
household’s stock for mating their animals. This issue is likely to be of a more serious concern with the declining
availability of communal grazing lands
Among the households who owned small ruminants during the year, 7.5% (198 households) had zero beginning stock,
but acquired the animals during the year through purchases and gifts. About 93% of these households acquired the
animals through purchases, and 5.6% acquired them through gifts. Of the purchases, about 70% of the animals were
meant for reproductive purpose, and only 13% were meant for reselling. Analysis of ending stock ownership reveals
that only 29% of the households who had zero beginning stock ended up with zero ending stock. On the other hand,
11.3% (298 households) who had owned small ruminants during the year had no ending stock, of which about 85%
had non-zero beginning stock. These results show that while some household get into small ruminant production,
others exit from small ruminant production during the year, although the proportion that exit is higher by about 4%.

Off-takes and inflows
We found a total gross off-take rate (total off-take as a sum of sales, deaths, given out as gift and lost due to theft,
divided by the sum of beginning stock and inflows during the year) of 34.3% constituted by commercial off-take of
18.9%, slaughter of 4.5%, death of 10.1% given out as gift of 0.3% and loss due to theft of 0.3% (Table 3). We also
found gross inflow rate (total inflow as a sum of births, purchases, and received as gift, divided by the sum of beginning
stock and inflows during the year) of 22.5% constituted by inflow due to birth of 18.4%, purchase of 3.9% and
obtained as gift of 0.2%. These results show that births are the most important sources of inflow and that there was
a decrease in the stock of small ruminants by 11.8% during the year. Negassa and Jabbar (2008) also found that there
was 27% and 13% reduction in sheep and goats stock within one year in their study areas in Ethiopia. We computed
lambing and kidding rates of 66.6% and 67.4%, respectively.

8

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

Table 3. Off-take rates and inflow rates by type of animal
Type of off-take or inflow

Rate (%)

Total gross off-take rate

34.3

Small ruminant gross commercial off-take rate

18.9

Small ruminant net commercial off-take rate

15.1

Small ruminant slaughter rate

4.5

Sheep gross commercial off-take rate

20.9

Sheep net commercial off-take rate

16.3

Goat gross commercial off-take rate

16.0

Goat net commercial off-take rate

13.3

Small ruminant death rate

10.1

Sheep death rate

10.5

Mature male sheep death rate

6.1

Ewe death rate

11.2

Lamb death rate

11.7

Goat death rate

9.6

Mature male goats death rate

5.4

Doe death rate

9.7

Goat-kid death rate

12.0

Gross inflow rate

22.5

Inflow rate due to birth

18.4

Purchase

3.9

Obtained as gift

0.2

We also found gross net commercial off-take rate (sales less purchases divided by the sum of beginning stock and
inflows during the year) of 15.1% for small ruminants (Table 3). Commercial off-take rates vary slightly between
sheep and goats. We found gross commercial off-take rate of 20.9% and 16% for sheep and goats, respectively. The
corresponding net commercial off-take rates for sheep and goats are 16.3% and 13.3%, respectively. Negassa and
Jabbar (2008), using Ethiopian CSA data, calculated gross commercial off-take rates of 19% and 15% for sheep and
goats, respectively. The gross commercial off-take rates they calculated using their own survey data was much higher
at 34% and 30% for sheep and goats, respectively. On average among the households who own small ruminants, we
found net sales of 1.19 animals per household. This was confirmed by the total number of sales of 3924 heads of small
ruminants versus a total purchase by producers of 802 heads of small ruminants among the 2634 owning households.
About 27% of small ruminant owning households reported loss of small ruminants due to death and about 23% of
owning households reported slaughtering own animal for home consumption. The slaughter rates for household
consumption for sheep and goats were 4.8% and 4.2%, respectively. Loss due to theft appears to be small, with only
1.5% of households reporting it, and a lesser proportion (1.1%) reported giving out small ruminants as gift.
The small ruminant death rate we computed (about 10.1%) is lower than normally reported (Table 3). It may be
that the study year was a good season year in terms of rainfall and feed availability as confirmed by community level
data which shows that more than 68% of surveyed communities reporting normal or above normal rainfall season
and more than 62% reporting no significant livestock diseases during the year. Death rates for sheep and goats are
computed to be 10.5% and 9.6%, respectively. The death rate figures for lambs and goat kids are 11.7% and 12%,
respectively. The death rates of mature male sheep and goats are the lowest at 6.1% and 5.4%, respectively.
The most cited cause of loss of small ruminants due to death is diseases, which was reported by 99% of households
who lost animals for death. Moreover, about 71% of deaths of small ruminants were due to diseases. Injuries and
accidents was the second important reported cause of death of animals, reported by 22%, with about 16% of deaths
accounted for by this incidence. About 13% of households cited predators and feed shortage due to drought as causes
of small ruminant death, accounting for 9.4% of deaths.

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

9

Market participation
More than 51% of small ruminant owning households sold small ruminants during the study period, while just about
13% bought the animals. About 7.5% of owners bought the animals to build a new stock in the year. Hence, only 5.5%
of households were purchasers who also had own stock at the beginning of the study period. Analysis of the market
participation regime of households also shows that about 40% of owners remained non-seller non-buyer during the
study period, while about 46% and 8% of owners were sellers only and buyers only, respectively. Only about 5%
of owners were involved in both buying and selling. Similarly, just above 50% of owners were net sellers during the
year, while about 41% and 9% of owners were autarkic and net buyers, respectively. Among those who purchased
small ruminants, the average purchase was 2.3 heads, while among those who sold the animals, the average sale was
2.9 heads. Among the sold animals, about 31% were mature male sheep, followed by ewes (18%), does (16.6%), and
mature male goats (11.4%). We also computed the ratio between sales and slaughter for household consumption
of 4.35 for sheep and 3.85 for goats, suggesting that small ruminants are kept primarily as source of cash for the
household rather than for own consumption.
Mean t-tests of characteristics of small ruminant owners who participated in the market (either as seller or buyer) and
those who did not participate shows that participants have higher proportion of households who slaughter for home
consumption and slaughter higher proportion of their stock, use more purchased feed, have larger herd size, and earn
more income from non-farm activities than non-participants. On the other hand, non-participants have higher landlabour ratio, higher land per capita, and are farther away from livestock markets. We find no difference in asset wealth
between the two. These results show that non-market participants have better return opportunities from land-based
agricultural activities, while participants do not seem to have these opportunities because of smaller land holding. The
comparative advantage of households with small-land size appears to be on livestock production and non-farm income.
About 5% of small ruminant owners are involved in small ruminant fattening business. These fatteners have been in
the business for an average of 3.5 years. The average fattening cycle is five months. We found that the three major
constraints faced by fatteners in their fattening business are feed shortage, diseases and market problem in that order.

Reasons of selling and buying
Households reported meeting planned household expenses, meeting emergency household expenses, removal of
animal because of low productivity, removal of animal because of sickness, and trading (buying and selling for profit) as
reasons for selling small ruminants. More than 79% of sellers cited meeting planned household expenses as a reason,
followed by about 12% of households who cited meeting emergency household expenses (Table 4). Similarly, about
74% of sales were made to meet planned expenses, and about 11% of sales were made to meet emergency expenses
(Table 4). These results show that households do in fact plan ahead of time on their sales of small ruminants to meet
required household expenses. Trading was cited by only about 3% of sellers.
Table 4. Reasons of selling (% of owning households, selling households, and number of sales)
Reason

% of households
who owned (N =
2634)

% of households
who sold (N =
1355)*

% of sales (N =
3924)

Meet planned household expenses

40.8

79.3

73.5

Meet emergency household expenses

6.0

11.7

10.6

Livestock trading as a business

1.7

3.3

6.1

Culling because not productive or sick

1.8

3.4

2.8

Others (credit payment, input purchase, fines etc.)

3.6

7.1

7.0

*Percentages sum up to slightly more than 100% because a few households sold animals for more than one reason.

Small ruminant producers purchase small ruminants for different purposes. Among the reported reasons were
reproduction, replacement of unproductive or old animals, trading and household consumption. About 66% of the

10

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

household who purchased small ruminants made the purchase for reproduction purposes, which accounted for about
62% of the purchases (Table 5). This was followed by about 14.4% of the buyers reporting household consumption
as a reason, and by 13.8% of households who reported trading. These results clearly show that most of the small
ruminants that are sold come from households own production. Most of the small ruminants that are bought for
reproduction purposes are ewes and does.
Table 5. Farmers’ reasons of buying small ruminants (% of owning households, buying households, and number of
purchases)

2.7
62.3

Trading

8.7
1.8

% of households who
purchased (N = 348)*
4.3
66.1
13.8

22.8

Household consumption

0.6

14.4

9.0

4.6

3.1

Reason
Replacement of old or culled animals
Reproduction

% of households who
owned (N = 2634)
0.6

1.9

Store of wealth

% of purchase (N = 802)

*Percentages sum up to slightly more than 100% because a few households bought animals for more than one reason.

Responsibility for selling and income control
More than 87% of the sales of small ruminants are done by the household head. The income from the sales of small
ruminants is controlled either by the head (in 41% of seller households) or jointly by the head and the spouse (in
54% of seller households). The proportion of female headed households among those who sold small ruminants was
15%. Hence, these results indicate that in the highlands of Ethiopia, in about 69% of seller households, income from
the sale of small ruminants is controlled either by women or jointly by men and women, indicating the importance
of the proceeds for the welfare of household members. Studies on gender and income control reported that income
controlled by women is more likely to be used for household consumption (Bertrand et al. 2013; Kariuki et al. 2013;
Njuki and Mburu 2013).

Market places and market channels
Small ruminants are sold at farm gate, in markets at the peasant association (PA), in markets in nearby PAs, in district
markets, and in zonal or regional markets. District markets account for 38.2% of sales followed by markets in nearby
PAs which accounted for 35% (Table 6). Hence, district markets and markets in other PAs are the most important
market places for small ruminant producers. Markets in the PAs in which a respondent household resides accounted
for 17.4%. Farm gates, zonal and regional markets are the least used by small ruminant producers. These results
show that almost all sales of small ruminants by farmers are done in markets within the district. The pattern of the
importance of these market places remains almost the same when disaggregated by type of animals sold (Table 6).
Table 6. Market places of sale by type of animal (% of sales)
Market place
Type of animal

Farm-gate

PA

Other PA

District

Zonal

Regional

Small ruminant
Mature male sheep

4.5
4.8

17.4
18.0

35.0
29.9

38.2
40.8

4.5
6.2

0.4
0.3

Ewe

6.1

18.5

31.4

37.9

5.2

0.6

Lamb

2.7

25.1

37.7

31.3

2.9

0.3

Mature male goats

3.5

10.8

37.8

43.0

4.3

0.6

Doe

5.1

12.3

42.5

36.8

3.2

0

Goat kid

3.9

16.9

41.7

35.0

2.4

0

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

11

In terms of market channels for producers, farmer-to-urban consumer, farmer-to retailer,4 and farmer-to-farmer
channels stand out as most important channels, which account for 24.8, 22.2 and 21.6% of sales, respectively (Table
7). Assemblers and wholesalers accounted for 17.1 and 13.1% of sales, respectively. It is interesting to note that there
was no reported sale to cooperatives, and sale to processors5 is the least important among the market channels that
were used by producers. There is variation in the importance of market places when analysis is disaggregated by
type of animal sold (Table 7). Farmer-to-farmer channels are more important for ewes, does, and goat kids, perhaps
because of the role of these types of animals in reproduction which is the main purpose of purchases for farmers. The
farmer-to-urban consumer channel is more important for mature male sheep and goats.
Table 7. Type of buyers by type of animals (% of buyers)
Type of animal

Type of buyers
Farmer

Assembler

Wholesaler

Retailer

Processor

Urban consumer

Coops

Small ruminant

21.6

17.1

13.1

22.2

1.1

24.8

0

Mature male sheep

12.2

21.4

14.4

22.5

0.8

28.6

0

Ewe

37.3

13.0

11.4

18.9

0.7

18.7

0

Lamb

21.4

19.7

12.7

24.2

0.9

21.0

0

Mature male goats

12.0

15.8

15.5

22.1

1.6

32.9

0

Doe

32.5

13.7

10.8

22.1

1.4

19.2

0

Goat kid

27.6

11.3

10.9

24.8

1.7

23.6

0

4.2	 Econometric analysis results
In this section we present and discuss econometric results of the estimation of determinants of household
participation in small ruminant markets as seller and as buyer; the market participation position of households as
net seller, autarkic and net buyer; and the market participation regime of households as non-seller non-buyer, seller
only, buyer only, and seller and buyer. Household characteristics included as explanatory variables are household
size (number of people), age of household head and squared value in years, sex of household head (male = 1), level
of education of head (years) and total dependency ratio. Herd characteristics included as explanatory variables are
herd size (number of animals), proportion of female animals in the herd, and the number of animals that died in the
year. Household assets were measured in household labour supply (members between 14 and 64 years of age), land
size (ha), household wealth as value of physical assets (1000 Ethiopian birr, ETB)6, ownership of mobile (own = 1),
and non-farm cash income in the year (ETB 1000). Access to physical and institutional infrastructure was measured in
terms of walking time (minutes) to nearest livestock market and all weather road, walking time (minutes) to farmer
training centre or development agent (DA) post, and involvement in extension service and use of credit facilities
theprevious year. We also controlled for population density at PA level. We discuss the results of econometric
analysis of these models below. Descriptive statistics of the variables included in the regression models are given in
Table 8.

4  Retailers are defined as those who sell live shoats to individual consumers or producers.
5  Processors include slaughter houses, butchers, or food processing businesses such as restaurants and hotels.
6  The exchange rate during the survey year was USD 1 = ETB 19.25.

12

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

Table 8. Descriptive values of variables included in the regression models (N=2246)
Dependent variables
Market position

Market participation

%
Net buyer

9.4

Autarkic

40.5

Net seller

50.1

Non-seller non-buyer

40.4

Seller only

46.4

Buyer only

8.2

Seller and buyer

5.1
Mean

Min.

Max.

Sell or not

0.55

0

1

Buy or not

0.07

0

1

Age of household head (year)

45.70

18

120

Age of household head squared (year)

2221.77

324

14400

Sex of household head (male = 1, female = 0)

0.85

0

1

Family size (no.)

6.24

1

22

Dependency ratio

1.05

0

6

Available family labour (15–64 age)

3.35

1

13

Year of schooling of household head (year)

2.50

0

14

Land owned (ha.)

1.49

0

18

Household wealth (ETB 1000)

44.53

0.32

847.06

Non-farm cash income (ETB 1000)

3.91

0

207.54

Availability of cell phone (yes = 1, no = 0)

0.62

0

1

Herd size (no.)

8.26

1

67

Proportion of female animals (%)

72.00

0

100

Number of dead animals

0.84

0

29

Distance to nearest livestock market (walking minutes)

90.66

0

600

Distance to all weather road (walking minutes)

50.25

0

650

Distance to DA post (walking minutes)

31.74

0

240

Involvement in extension program (yes = 1, no = 0)

0.42

0

1

Credit use (yes = 1, no = 0)

0.21

0

1

Population density (persons/ha.)

2.81

0.46

28.90

Explanatory variables

Bivariate probit regression results
Table 9 presents the results of the maximum likelihood bivariate probit estimates of the models explaining the
probability of household participation in small ruminant markets as seller and as buyer. The estimate of ρ (the
correlation coefficient between the errors of the two binary outcomes) that maximized the bivariate probit function
is 0.096 and is significant at the 10% level. This shows that the random disturbances in the small ruminant market
participation decisions of sellers and buyers are affected in the same directions by random shocks. The implication
is that the market participation decisions are not statistically independent. Separate estimation of the equation
would, therefore, lead to inefficient parameter estimates. The sample value of the likelihood ratio is –1922.385 and
is significant at the 1% level, showing that the independent variables taken together influence market participation
decisions.

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

13

Table 9. Bivariate regression results for selling and buying
Bivariate probit regression – Coeff. (std. er.)
Explanatory variables

Sell or not

Buy or not

Age of household head (year)

0.00969 (0.01490)

–0.00838 (0.02486)

Age of household head squared (year)

–0.00009 (0.00015)

0.00009 (0.00025)

Sex of household head (male = 1, female = 0)

–0.04488 (0.08678)

0.00057 (0.13295)

Family size (no.)

–0.04599 (0.03439)

–0.00063 (0.05200)

Dependency ratio

0.12045 (0.08073)

–0.00610 (0.12400)

Available family labour (15–64 age)

0.07428 (0.05698)

–0.00541 (0.08637)

Year of schooling of household head (year)

0.00137 (0.00992)

0.01306 (0.01461)

Land owned (ha.)

–0.09215 (0.02175) ***

–0.02647 (0.03334)

Household wealth (ETB 1000)

–0.00082 (0.00046)*

0.00088 (0.00055)

Non-farm cash income (ETB 1000)

0.00087 (0.00334)

–0.00392 (0.00555)

Availability of cell phone (yes = 1, no = 0)

–0.01541 (0.06280)

0.00803 (0.09673)

Herd size (no.)

0.06174 (0.00540)***

0.01489 (0.00625)**

Proportion of female animals (%)

–0.99608 (0.12132) ***

–0.00916 (0.19279)

Number of dead animals

–0.07853 (0.01547)***

0.00180 (0.02048)

Distance to nearest livestock market (walking minutes)

–0.00153 (0.00047) ***

–0.00073 (0.00068)

Distance to all weather road (walking minutes)

0.00036 (0.00039)

–0.00061 (0.00066)

Distance to DA post (walking minutes)

–0.00004 (0.00095)

–0.00151 (0.00161)

Involvement in extension program (yes = 1, no = 0)

0.17575 (0.05761) ***

0.24894 (0.08488)***

Credit use (yes = 1, no = 0)

0.18887 (0.07021) ***

0.20410 (0.09667)**

Population density (persons/ha.)

0.00357 (0.01136)

–0.04120 (0.02566)

Constant

0.30710 (0.39094)

–1.38180 (0.64319)**

Number of observation

2246

Wald chi2 (40)

300.99

Prob > chi

0.0000

2

The results show that small ruminant herd size, participation in livestock extension service, and use of credit services
increase the probability of market participation as seller, all with expected signs. Herd size increases participation as
seller because of the possibility to produce surplus to market, result that is consistent with the findings of Negassa and
Jabbar (2008) in the highlands of Ethiopia, and Bellemare and Barret (2007) for the pastoral regions of northern Kenya
and southern Ethiopia. The livestock development extension program increases the probability of selling consistent
with its core objectives of promoting household’s involvement in market-oriented livestock production. Use of credit
facilities increases selling since the imperfect or missing credit markets is a major constraint of investment in livestock
in the highlands of Ethiopia.
Higher proportion of female animals in the herd, number of dead animals in the year, land size, household wealth,
and distance to nearest livestock market decrease the probability of market participation as seller, also all with
expected signs. The number of dead animals reduces probability of selling, consistent with and reinforcing the effect
of larger herd size increasing the probability of selling. Female animals in the herd are usually preferably kept for
breeding purposes and in a small herd size such as shown by the average stock size of sample households, the higher
proportion of female animals is likely to decrease selling because households retain female animals to sustain their

14

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

stock. Multivariate econometric results obtained by Barret et al. (2006) for pastoralists showed no significant effect of
proportion of female animals on livestock marketing behaviour of herders.
Households with larger land size who are wealthier are more likely to have alternative cash sources and use small
ruminants for home consumption and so the lower likelihood for them to participate in the market as sellers. Such
households may have higher opportunity costs for involvement in market-oriented small ruminant production. Desta
(1999) posits that in a local economy offering limited alternative livelihood strategies, livestock are the most attractive
assets available and a best option to meet future food security for the household. Barret et al. (2006) also reported
that the low market participation sites in their study areas were the areas which had the best alternative livelihoods.
The farther the household resides from the nearest livestock market, the less likely it will be involved in selling due
to both fixed and variable marketing costs. Distant markets can be source of fixed costs in the form of transport
and lodging for the participant, as well as variable costs. Barret et al. (2006) also found that reduced costs to market
participation for Ethiopian pastoralists stimulate livestock marketing at the margin.
Marginal effect coefficients of the bivariate model are given in Table (10). Marginal effect results show that
involvements in extension and use of credit have higher marginal effects. Involvement in livestock extension and use
of credit increase the probability of a seller by about 7 and 7.4%, respectively, while one more animal in the herd
increases probability of participation as a seller by 2.4%. The small effect of an increase of one head of animal to the
heard on the probability of market participation shows that the average herd size is too small to promote market
participation and significant effort is needed to raise the herd size to an optimal level.
Table 10. Marginal effects of the bivariate regression equation
Marginal

effects

after
bivariate
dy/dx (std. er.)

probit

Explanatory variables

Sell or not

Buy or not

Age of household head (year)

0.00382 (0.00588)

–0.00100 (0.02485)

Age of household head squared (year)

–0.00003 (0.00006)

0.00001 (0.00003)

Sex of household head (male = 1, female = 0)

–0.01765 (0.03404)

0.00057 (0.01573)

Family size (no.)

–0.01814 (0.01356)

–0.00007 (0.00619)

Dependency ratio

0.04751 (0.03184)

–0.00073 (0.01475)

Available family labour (15–64 age)

0.02930 (0.02247)

–0.00064 (0.01027)

Year of schooling of household head (year)

0.00054 (0.00391)

0.00155 (0.00174)

Land owned (ha.)

–0.03634 (0.00858)***

–0.00315 (0.00396)

Household wealth (ETB 1000)

–0.00032 (0.00018)*

0.00010 (0.00007)

Non-farm cash income (ETB 1000)

0.00034 (0.00132)

–0.00047 (0.00066)

Availability of cell phone (yes = 1, no = 0)

–0.00608 (0.02475)

0.00095 (0.01147)

Herd size (no.)

0.02435 (0.00212)***

0.00177 (0.00074)**

Proportion of female animals (%)

–0.39285 (0.04788)***

–0.00109 (0.02293)

Number of dead animals

–0.03097 (0.00610)***

0.00021 (0.00244)

Distance to nearest livestock market (walking minutes)

–0.00060 (0.00018)***

–0.00009 (0.00008)

Distance to all weather road (walking minutes)

0.00014 (0.00016)

–0.00007 (0.00008)

Distance to DA post (walking minutes)

–0.00002 (0.00038)

–0.00018 (0.00019)

Involvement in extension program (yes = 1, no = 0)

0.06907 (0.02253)***

0.03068 (0.01077)***

Credit use (yes = 1, no = 0)

0.07365 (0.02698)***

0.02665 (0.01377)*

Population density (person/ha.)

0.00141 (0.00448)

–0.00490 (0.00302)

regression

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

15

The combined effect of these variables on market participation could guide the development of small ruminant
extension package. An increase of herd size by 10 animals combined with involvement in extension and credit
increases the probability of market participation as a seller by more than 38%. These results suggest that improved
production supported with strengthened livestock extension service and availability of credit facilities to small
ruminant producers can be helpful in encouraging market-oriented small ruminant production.
The effect of proportion of female animals in the herd is also important: ten percent increase in the proportion of
female animal decreases probability of a selling by almost 4%. An increase of two hours walking to livestock market
decreases the probability of participation as seller by 7.2%. Development of livestock market places, improvement of
access to road and transport infrastructure and collective action to sell small ruminants may be potential option to
explore to reduce marketing costs. Our results show that the development of livestock markets, market institutions
and transportation infrastructure should be combined with improved production and access to extension and credit
services for highest impact to promote market oriented small ruminant production.
The results also show that herd size, involvement in livestock extension, and use of credit services increase the
probability of buying, all with expected signs. Descriptive analysis results show that most of the purchases made by
households were meant for reproduction purposes. Hence, herd size, not only encourages selling, but also buying
apparently in order to build stock and produce marketable surplus. This effect of herd size on the probability of selling
and buying suggests that building herd size is crucial for market-oriented small ruminant production. Similarly, the
livestock extension service increases probability of buying, in addition to its positive effect on the probability of selling.
The livestock extension package seems to have started showing effect in promoting market-oriented small ruminant
production. Access and use of credit facilities also increase probability of buying and selling, suggesting that livestock
credit facilities are important to promote market-oriented livestock production. Marginal effect results show that
involvement in extension and use of credit increase the probability of buying by 3.1% and 2.7%, respectively.

Ordered probit regression results
Table 11 presents the results of the maximum likelihood ordered probit equation explaining the probability of
household positions in the market. The model is significant at 1% level, showing that the independent variables
taken together explain the market position of households. Results of the ordered probit reinforce the findings in the
bivariate probit estimation. Results show that household total dependency ratio, herd size, and use of credit increase
the probability of a household being a net seller, all with expected signs. Higher dependency ratio increases household
cash requirements to cover miscellaneous expenses related with dependents, and raises the probability of a household
being net seller than autarkic or net buyer. As herd size increases, household is more likely to be net seller than to be
autarkic or net buyer because of the effect to have surplus for sale, other things held constant. Credit, by easing the
liquidity constraints to invest in livestock, increases the probability of being net seller. On the other hand, proportion
of female animals, land size, household wealth, number of dead animals, and distance to livestock market decrease the
probability of net selling. These same variables also reduce the probability of household participation as seller.

16

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

Table 11. Ordered probit regression results for market position of households
Explanatory variables

Coef. (Std. Er.)

Age of household head (year)

0.00997 (0.01343)

Age of household head squared (year)

–0.00010 (0.00013)

Sex of household head (male = 1, female = 0)

–0.06645 (0.08101)

Family size (no.)

–0.04304 (0.03172)

Dependency ratio

0.13846 (0.07559)*

Available family labour (15–64 age)

0.07366 (0.05295)

Year of schooling of household head (year)

–0.00129 (0.00931)

Land owned (ha.)

–0.05906 (0.01985)***

Household wealth (ETB 1000)

–0.00094 (0.00041)**

Non-farm cash income (ETB 1000)

0.00255 (0.00325)

Availability of cell phone (yes = 1, no = 0)

–0.01507 (0.05870)

Herd size (no.)

0.05125 (0.00494)***

Proportion of female animals (%)

–0.91889 (0.11447)***

Number of dead animals

–0.08027 (0.01410)***

Distance to nearest livestock market (walking minutes)

–0.00149 (0.00043)***

Distance to all weather road (walking minutes)

0.00042 (0.00037)

Distance to DA post (walking minutes)

0.00044 (0.00089)

Involvement in extension program (yes = 1, no = 0)

0.07318 (0.05389)

Credit use (yes = 1, no = 0)

0.12282 (0.06584)*

Population density (persons/ha.)

0.00711 (0.01061)

Number of observation

2246

LR chi (20)

244.77

Prob > chi2

0.0000

Pseudo R

0.0673

2

2

Marginal effect results (Table 12) show that a unit increase in dependency ratio increases the probability of being
net seller by 5.5%, while an addition of one head of animal to the herd increases probability of being a net seller by
2%. Use of credit increases the likelihood of net selling by about 5%. The fact that credit use affects positively both
the probability of selling and buying, as well as the probability of being net seller strengthens the point that livestock
credit is essential to promote market-oriented small ruminant production. A 10% increase in the proportion of female
animals decreases the likelihood of net selling by 3.6%. The negative effects of the proportion of female animals on
selling, and net selling can be reduced by increasing the reproductive efficiency of small ruminants. A death of one
animal also reduces probability of net selling by about 3.2%, consistent with the effect of herd size. An increase of 2
hours of walking distance to nearest livestock market decreases the probability of net selling by 7.1%, strengthening
the result of the bivariate probit.

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

17

Table 12. Marginal effect results for market position of households
Marginal effects after Ordered Probit Regression dy/dx (Std. Er.)
Explanatory variables

Net buyer

Autarkic

Net seller

Age of household head (year)

–0.00057 (0.00077)

–0.00338 (0.00455)

0.00395 (0.00532)

Age of household head squared (year)

0.00001 (0.00001)

0.00003 (0.00004)

–0.00004 (0.00005)

Sex of household head (male = 1,
female = 0)

0.00366 (0.00427)

0.02259 (0.02763)

–0.02625 (0.03188)

Family size (no.)

0.00248 (0.00184)

0.01457 (0.01075)

–0.01705 (0.01257)

Dependency ratio

–0.00798 (0.00441)*

–0.04689 (0.02563)*

0.05486 (0.02995)*

Available family labour (15–64 age)

–0.00424 (0.00307)

–0.02494 (0.01794)

0.02919 (0.02098)

Year of schooling of Household head
(year)

0.00007 (0.00054)

0.00044 (0.00315)

–0.00051 (0.00369)

Land owned (ha.)

0.00340 (0.00119)***

0.02000 (0.00674)***

–0.02340 (0.00786)***

Household wealth (EETB 1000)

0.00005 (0.00002)**

0.00032 (0.00014)**

–0.00037 (0.00016)**

Non-farm cash income (ETB 1000)

–0.00015 (0.00019)

–0.00086 (0.00110)

0.00101 (0.00129)

Availability of cell phone (yes = 1, no
= 0)

0.00087 (0.00336)

0.00511 (0.01989)

–0.00597 (0.02325)

Herd size (no.)

–0.00295 (0.00039)***

–0.01735 (0.00174)***

0.02031 (0.00195)***

Proportion of female animals (%)

0.05292 (0.00813)***

0.31115 (0.03978)***

–0.36408 (0.04537)***

Number of dead animals

0.00462 (0.00091)***

0.02718 (0.00484)***

–0.03180 (0.00559)***

Distance to nearest livestock market
(walking minutes)

0.00009 (0.00003)***

0.00050 (0.00015)***

–0.00059 (0.00017)***

Distance to all weather road (walking
minutes)

–0.00002 (0.00002)

–0.00014 (0.00013)

0.00016 (0.00015)

Distance to DA post (walking minutes) –0.00003 (0.00005)

–0.00015 (0.00030)

0.00017 (0.00035)

Involvement in extension program
(yes = 1, no = 0)

–0.00417 (0.00307)

–0.02480 (0.01827)

0.02897 (0.02130)

Credit use (yes = 1, no = 0)

–0.00660 (0.00336)**

–0.04180 (0.02249)*

0.04840 (0.02577)*

Population density (persons/ha.)

–0.00041 (0.00061)

–0.00241 (0.00359)

0.00282 (0.00420)

The marginal effect results also identified significant variables that affect probability of net buying (Table 12). Land
size, household wealth, proportion of females in the herd, number of dead animals and distance to livestock market
increase the probability of net buying, while dependency ratio, herd size, and credit use decrease the probability
of net buying. Wealthier households with larger land size are likely to buy small ruminants for home consumption,
although the marginal effects are quantitatively small. It is not clear why higher proportion of female animals in the
herd increase the probability of net buying. It could be that such households are induced to buy bucks or rams for
reproductive purposes. The effect is also significant: a ten percent increase in the proportion of female animals in the
herd increases the probability of net buying by about 5.3%. Similarly, it is interesting to see that distance to livestock
market increases the probability of net buying, while it decreases the probability of net selling. It could be that more
remote households rear small ruminants mostly for subsistence purposes. But, this is a tentative hypothesis to explain
unexpected result, and further research is required to test it.
The marginal effects for autarkic position show that land size, household wealth, proportion of female animals, number
of dead animals, and distance to livestock market increase the probability of being autarkic. These same variables
also increase the probability of net buying, suggesting households with these characteristics are likely to be either
autarkic or net buying. Distance to livestock market has high marginal effect. An increase in walking time to nearest

18

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

market by 2 hours increases the probability of being autarkic by 6%, reinforcing the importance of access to livestock
market as shown in the bivariate probit results. Dependency ratio, herd size, and use of credit decrease likelihood of
being autarkic, as expected. A unit increase in dependency ratio decreases likelihood of being autarkic by about 4.7%,
strengthening the finding that household cash requirements induce market participation. An increase of herd size by
one animal decreases the probability by 1.7%, and credit use decreases the probability by 4.2%.

Multinomial probit regression results
Maximum likelihood estimates of the multinomial probit model are given in Table 13. In comparison with being nonseller non-buyer, herd size, involvement in extension and use of credit increase the probability of being seller only.
The proportion of female animals, land size, number of dead animals, and distance to livestock market decrease the
probability of being seller only over being non-seller non-buyer. The marginal effect results (Table 14) show that an
increase of one animal in the herd increases probability of being seller only by 2.1%, while involvement in extension
and use of credit increase the probability by 4.7 and 5%, respectively. A 10% increase in the proportion of female
animals decreases the probability of being seller only by 3.7%. In comparison with being non-seller non-buyer, only
involvement in extension increases the probability of being buyer only, while male household head and land size
decrease the probability. The marginal effects of these variables are small.
Table 13. Multinomial probit regression results for market participation regimes of households
Multinomial probit regression – (Base non-seller non-buyer)
Coef. (std. er.)

Explanatory variables

Seller only

Buyer only

Seller and buyer

Age of household head (year)

0.01328 (0.02114)

–0.01800 (0.04418)

–0.00283 (0.03881)

Age of household head squared (year)

–0.00013 (0.00021)

0.00015 (0.00043)

0.00007 (0.00039)

Sex of household head (male = 1, female = 0)

–0.12648 (0.12301)

–0.43753 (0.22780)*

0.23904 (0.23284)

Family size (no.)

–0.05133 (0.04861)

0.06591 (0.09918)

–0.09119 (0.08320)

Dependency ratio

0.15343 (0.11417)

–0.07781 (0.24211)

0.16406 (0.19551)

Available family labour (15–64 age)

0.09965 (0.08069)

–0.00336 (0.16428)

0.09331 (0.13783)

Year of schooling of household head (year)

–0.00184 (0.01406)

–0.00407 (0.02930)

0.02617 (0.02257)

Land owned (ha.)

–0.13514 (0.03082)***

–0.11679 (0.06661)*

–0.11774 (0.05252)**

Household wealth (ETB 1000)

–0.00100 (0.00066)

0.00146 (0.00100)

–0.00018 (0.00095)

Non-farm cash income (ETB 1000)

0.00056 (0.00469)

–0.01517 (0.01597)

–0.00227 (0.00776)

Availability of cell phone (yes = 1, no = 0)

–0.03474 (0.08898)

–0.05500 (0.18190)

0.04037 (0.15328)

Herd size (no.)

0.08254 (0.00758)***

0.02413 (0.01674)

0.09066 (0.01053)***

Proportion of female animals (%)

–1.36869 (0.17175)***

–0.16324 (0.37717)

–1.01059 (0.30047)***

Number of dead animals

–0.08984 (0.02209)***

0.04505 (0.03427)

–0.14265 (0.04302)***

Distance to nearest livestock market (walking
minutes)

–0.00192 (0.00066)***

–0.00028 (0.00120)

–0.00320 (0.00118)***

Distance to all weather road (walking minutes)

0.00044 (0.00056)

–0.00128 (0.00144)

–0.00002 (0.00101)

Distance to DA post (walking minutes)

0.000001 (0.00135)

–0.00170 (0.00302)

–0.00249 (0.00261)

Involvement in extension program (yes = 1, no = 0)

0.23912 (0.08166)***

0.37022 (0.16233)**

0.49479 (0.13489)***

Credit use (yes = 1, no = 0)

0.24617 (0.09958)**

0.27403 (0.18990)

0.47520 (0.15337)***

Population density (persons/ha.)

0.00796 (0.01608)

–0.03361 (0.04643)

–0.04964 (0.04075)

Constant

0.42372 (0.55443)

–1.28217 (1.16460)

–1.35524 (1.00654)

Number of observation

2246

Wald chi (60)

313.77

Prob > chi2

0.0000

2

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

19

Table 14. Marginal effects for market participation regime of households
Marginal effects (std. er.) after multinomial probit regression
dy/dx (Std. Err.)

Explanatory variables

None Seller nor Buyer

Seller only

Buyer only

Seller and buyer

Age of household head (year)

–0.00290 (0.00583)

0.00438 (0.00595)

–0.00092 (0.00163)

–0.00056 (0.00237)

Age of household head
squared (year)

0.00003 (0.00006)

–0.00004 (0.00006)

0.00001 (0.00002)

0.00001 (0.00002)

Sex of household head (male
= 1, female = 0)

0.03430 (0.03353)

–0.03363 (0.03410)

–0.01858 (0.01262)

0.01791 (0.01006)*

Family size (no.)

0.01416 (0.01345)

–0.01354 (0.01352)

0.00374 (0.00362)

–0.00435 (0.00499)

Dependency ratio

–0.04120 (0.03162)

0.04178 (0.03177)

–0.00631 (0.00888)

0.00573 (0.01173)

Available family labour (15–
64 age)

–0.02715 (0.02236)

0.02669 (0.02240)

–0.00227 (0.00601)

0.00273 (0.00826)

Year of schooling of
household head (year)

–0.00022 (0.00389)

–0.00132 (0.00390)

–0.00020 (0.00107)

0.00174 (0.00134)

Land owned (ha.)

0.03855 (0.00850)***

–0.03423 (0.00862)***

–0.00156 (0.00245)

–0.00277 (0.00316)

Household wealth (ETB 1000) 0.00023 (0.00018)

–0.00032 (0.00018)*

0.00007 (0.00004)**

0.00002 (0.00006)

Non-farm cash income (ETB
1000)

0.00017 (0.00132)

0.00052 (0.00132)

–0.00058 (0.00059)

–0.00012 (0.00046)

Availability of cell phone (yes
= 1, no = 0)

0.00834 (0.02458)

–0.01059 (0.02478)

–0.00158 (0.00678)

0.00383 (0.00904)

Herd size (no.)

–0.02331 (0.00211)***

0.02118 (0.00205)***

–0.00090 (0.00060)

0.00303 (0.00060)***

Proportion of female animals
(%)

0.36867 (0.04752)***

–0.37147 (0.04805)***

0.02237 (0.01382)

–0.01957 (0.01809)

Number of dead animals

0.02545 (0.00613)***

–0.02295 (0.00612)***

0.00382 (0.00122)*** –0.00632 (0.00259)**

Distance to nearest livestock
market (walking minutes)

0.00057 (0.00018)***

–0.00046 (0.00018)**

0.00004 (0.00004)

–0.00014 (0.00007)**

Distance to all weather road
(walking minutes)

–0.00009 (0.00015)

0.00016 (0.00016)

–0.00006 (0.00005)

–0.00001 (0.00006)

Distance to DA post (walking
minutes)

0.00010 (0.00037)

0.00011 (0.00038)

–0.00006 (0.00011)

–0.00015 (0.00016)

Involvement in extension
program (yes = 1, no = 0)

–0.07899 (0.02231)***

0.04710 (0.02257)**

0.00825 (0.00630)

0.02364 (0.00878)***

Credit use (yes = 1, no = 0)

–0.07850 (0.02670)***

0.04974 (0.02715)*

0.00434 (0.00765)

0.02441 (0.01176)**

Population density (persons/
ha.)

–0.00001 (0.00455)

0.00460 (0.00463)

–0.00127 (0.00171)

–0.00332 (0.00249)

Herd size, involvement in extension and use of credit increase the probability of being seller and buyer over being
non-seller non-buyer, reinforcing our earlier results that these variables are important to promote market-oriented
small ruminant production. The proportion of female animals, land size, and number of dead animals decrease the
probability of being seller and buyer. Marginal effect results show that involvement in extension and use of credit
increase the probability of being seller and buyer by 2.4% each. Male household head increases the probability of being
buyer and seller by 1.8%. The marginal effects of the other variables are small.

20

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

5	 Conclusions and implications
Small ruminants, which account for more than half of the domesticated ruminants in the world, are an important
component of the farming systems in most developing countries. Despite their economic and social importance, socioeconomic and marketing research on small ruminants has so far been limited, a fact which also holds strongly true
in Ethiopia. This study is aimed at contributing to the limited knowledge on household marketing behaviour in small
ruminants in the highlands of Ethiopia.
Ethiopia, with an estimated population of 27.35 million sheep and 28.16 million goats in 2012/13, is one of the African
countries with the largest small ruminant population in the continent. However, small ruminant production in the
country is characterized by low productivity based on traditional technology. Promoting market-oriented small
ruminant production in Ethiopia requires an understanding of the marketing behaviour of the producers, and the
physical and institutional infrastructural constraints limiting smallholder participation in markets. This study, based on
survey data of 5004 households, uses analysis of descriptive information and econometric analysis to draw implications
to promote market orientation of households.
Just over half of the surveyed households rear small ruminants with an average flock size of 7.8 animals. Breeding
stock dominate the herd structure, consistent with the primary producers’ objective of reproduction. Because of the
highland nature of the study area, sheep dominate the small ruminant herds. We find that sheep and goat production
are, for the most part, separate enterprises, as only 14% of small ruminant producers rear both sheep and goat.
However, about 92.8% of small ruminant producers also keep cattle showing that small ruminant production is done
together with cattle rearing. The fact that about 47% of sheep producers do not own rams and 44% of goat producers
do not own bucks indicates the need for attention to breeding strategies at household level.
We find total gross small ruminant off-take rate of 34.3%, and gross inflow rate of 22.5%, suggesting that there was
a decrease in the stock of small ruminants by 11.8% during the year in the study area. Births are the most important
sources of inflow. The gross and net commercial off-take rates of small ruminants are 19 and 15%, respectively.
Sheep have slightly higher gross and net commercial off-take rates than goats. The ratio between sales and slaughter
for household consumption are 4.35 for sheep and 3.85 for goats, indicating that small ruminants are kept primarily
as source of cash for the household rather than for own consumption. Loss of animals due to death is an important
small ruminant outflow category. About 10% of the total small ruminant stock was lost due to death during the study
period. This proportion is lower than normally reported and may be because the study year was a good season year
in terms of rainfall and feed availability. Death rate for sheep is slightly higher than that of goats. The death rates for
lambs and goat kids are higher than those of mature animals. The most cited cause of loss of small ruminants due to
death is diseases.
Just about half of the small ruminant producers participated in the market as sellers, while only about 13% participated
as buyers, and 40% did not participate in the market either way. Producers participate in the market mostly either as
seller only or as buyer only, with only 5% of market participants participating both as sellers and buyers. Mature male
sheep are the most sold type of animals. Almost all those who participate in the market as sellers are net sellers. Only
9% of owners are net buyers.

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

21

The most important reason for selling as reported by producers is to meet planned household expenses, followed by
a much smaller proportion reporting meeting emergency household expenses as a reason. This result is contrary to
the widely held belief that producers sell animals mainly to meet unplanned household expenses. The most important
reason of buying small ruminants is for reproductive purposes. Selling of animals is the responsibility of the household
head in almost all households. However, income from small ruminant sales is controlled either by women or jointly
by the husband and wife in about 69% of the sales, suggesting that income from small ruminant sales is important for
household welfare.
The two most important market places for small ruminants are district markets and markets in the nearby PAs.
Farm gates, zonal and regional markets are the least used by small ruminant producers. Hence, livestock market
development interventions need to pay attention to markets that operate within the districts. In terms of market
channels for producers, farmer-to-urban consumer, farmer-to-retailer, and farmer-to-farmer channels stand out as
most important channels. No sale was reported to cooperatives, and selling to processors is the least important
among the market channels that were used by producers. However, farmer-to-farmer channels are more important
for ewes, does, lambs and goat kids, perhaps because of the role of these types of animals in reproduction which is
the main purpose of purchases by farmers. The farmer-to-urban consumer channel is more important for adult male
animals.
Econometric results identified important variables that affect market participation behaviour of small ruminant
producers. Herd size increases the probability of selling, buying, being net seller, being seller only, and being seller
and buyer, and decreases the probability of being net buyer, autarkic, and non-seller-non-buyer, suggesting that herd
size is a crucial factor for market participation, consistent with the findings that established the importance of asset
ownership for market participation (Bellemare and Barret 2006; Barret 2008; Negassa and Jabbar 2008). The fact that
herd size not only promotes selling but also buying indicates that larger herd size is needed to transform the small
ruminant production into market orientation. Methods of increasing herd size could include promoting improved
production and specialized small ruminant producers, combined with availing credit for small ruminant production.
Reinforcing the effect of herd size on market participation, the number of dead animals in the year decreases the
probability of selling, being net seller, being seller only, and being seller and buyer, and increases the probability of
being net buyer, autarkic, and being non-seller non-buyer. The most important cause of death of animals is diseases.
Hence, the result suggests that improved animal health care and reduction of loss of animals is an important
consideration in promoting market-oriented small ruminant production.
However, the structure of the herd also matters in a crucial way. The proportion of female animals in the herd
decreases the probability of selling, being net seller, being seller only, and being seller and buyer and increases the
probability of being net buyer, autarkic and being non-seller non-buyer. These results indicate that promoting modern
breeding approaches that increase the efficiency of reproduction in small ruminants can promote market participation.
Land size decreases the probability of selling, being net seller, and being seller only, being buyer only and being seller
and buyer, and increases the probability of being net buyer, being autarkic and being non-seller non-buyer. These
results suggest that households with larger land size may be more likely to have alternative sources of cash income
and are likely to use own or buy small ruminants for home consumption. The opportunity cost of small ruminant
production for households with larger land size may also be high. Perhaps, such households rely more on land-based
agricultural activities. Similarly, household wealth decreases the probability of selling, net selling, and seller only, while
it increases the probability of net buying, and being autarkic.
Distance to livestock market is another important variable that affects market behaviour of households. Distance
from homestead to nearest livestock market decreases the probability of selling, being net seller, being seller only,
and being seller and buyer, and increases the probability of being net buyer, autarkic, and non-seller non-buyer. These
results suggest that improvement in livestock market access should be an important consideration in promoting
market-oriented small ruminant production. It could take the form of developing market infrastructure such as
building market places and/or developing and improving road infrastructure to reduce transportation costs. Moreover,
promoting collective action for marketing small ruminants should be explored as an option.

22

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

The effects of the two institutional factors of involvement in extension and credit use are found to be strong.
Involvement in livestock extension programs increases the probability of selling, buying, being seller only, being buyer
only, and being seller and buyer and decreases the probability of being non-seller non-buyer. The effect of credit
use is similar. Credit use increases the probability of selling, buying, net selling, being seller only, and being seller and
buyer, while it decreases the probability of net buying, being autarkic and being non-seller non-buyer. These results
suggest that strengthening the livestock extension program supplement by credit facilities can play important role
in promoting market-oriented small ruminant production. In particular, the promotion of market-oriented livestock
extension needs to be given due attention.
In summary, our results offer important insights about the development of intervention programs to promote marketoriented small ruminant production. An effective package of interventions to promote market-oriented small ruminant
production will need to include development of livestock market infrastructure and market institutions, improved
access to extension and credit use, efficient animal reproduction and management and proper animal health care.

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

23

References
Abebe, Y., Melaku, S. and Tegegne, A. 2013 Assessment of sheep marketing system in Burie district, North Western
Ethiopia. Wudpecker Journal of Agricultural Research 2(3):97–102.
Ayele, G., Jabbar, A.M., Teklewold, H., Mulugeta, E. and Kebede, G. 2006 Seasonal and inter-market differences in
prices of small ruminants in Ethiopia. Journal of Food Products Marketing (USA) 12(4):59–77.
Barrett, C.B., Bellemare, M.F. and Osterloh, S.M. 2006. Household-level livestock marketing behavior among northern
Kenyan and southern Ethiopian pastoralists. In: Little, P.D. and McPeak, J.G. (eds), Pastoral livestock marketing in
eastern Africa: Research and policy challenges. London, UK: Intermediate Technology Development Group Publishing.
Bellemare, M. and Barrett, C.B. 2006. An ordered tobit model of market participation: Evidence from Kenya and
Ethiopia. American Journal of Agricultural Economics 88(2):324–337.
Barrett, C.B. 2008. Smallholder market participation: Concepts and evidence from eastern and southern Africa. Food
Policy 33(4):299–317.
Bertrand, M., Pan, J. and Kamenica, E. 2013. Gender identity and relative income within households. NBER Working Paper
19023. Massachusetts: NBER.
Boughton, D., Mather, D., Barrett, C.B., Benfica, R., Abdula, D., Tschirley, D. and Cunguara, B. 2007. Market
participation by rural households in a low-income country: An asset-based approach applied to Mozambique. Faith
and Economics 50:64–101.
von Braun J., Bouis, H. and Kennedy, E. 1994. Conceptual framework. In: von Braun, J. and Kennedy, E. (eds),
Agricultural commercialization, economic development, and nutrition. Baltimore, Maryland, USA: Johns Hopkins
University Press. pp. 9–33.
Desta, S. 1999. Diversification of livestock asset for risk management in the Borana pastoralist system of southern
Ethiopia. PhD thesis. Logan, Utah, USA: Utah State University:
Federal Democratic Republic of Ethiopia Central Statistical Agency. 2014. Agricultural sample survey 2013/14 [2006
EC]. Volume II. Report on livestock and livestock characteristics (Private peasant holdings). Statistical Bulletin 573.
Addis Ababa, Ethiopia.
Gebremedhin, B., Hoekstra, D. and Tegegne, A. 2006 Commercialization of Ethiopian agriculture: Extension service from
input supplier to knowledge broker and facilitator. IPMS (Improving Productivity and Market Success) of Ethiopian
Farmers Working Paper No. 1. Nairobi, Kenya: ILRI (International Livestock Research Institute).
Gebremedhin, B. and Jaleta, M. 2012 Interdependence of smallholders’ net market positions in mixed crop–livestock
systems of Ethiopian highlands. Journal of Development and Agricultural Economics 4(7):199–209.
Gizaw, S., Tegegne, A., Gebremedhin, G. and Hoekstra, D. 2010. Sheep and goat production and marketing systems
in Ethiopia: Characteristics and strategies for improvement. IPMS (Improving Productivity and Market Success) of
Ethiopian Farmers Project Working Paper 23. Nairobi, Kenya: ILRI (International Livestock Research Institute) d.
Kariuki, J., Njuki, J., Mburu, S. and Waithanji, E. 2013 Women, livestock ownership and food security. In: Njuki, J. and
Sanginga, P.C. (eds), Women, livestock ownership, and markets: Bridging the gender gap in eastern and southern Africa.
Nairobi, Kenya: ILRI (International Livestock Research Institute).
Kosgey, I.S. 2004. Breeding objectives and breeding strategies for small ruminants in the tropics. PhD thesis.
Wageningen, the Netherlands: Wageningen University.
Negassa, A. and Jabbar, M. 2008. Livestock ownership, commercial off-take rates and their determinants in Ethiopia. Research
Report 9. Nairobi, Kenya: ILRI (International Livestock Research Institute).

24

Factors determining household market participation in small ruminant production in the highlands of Ethiopia

Njuki, J. and Mburu, S. 2013. Gender and ownership of livestock assets. In: Njuki, J. and Sanginga, P.C. (eds),
Women, livestock ownership, and markets: Bridging the gender gap in eastern and southern Africa. Nairobi, Kenya: ILRI
(International Livestock Research Institute).
Oluwatayo, I. and Oluwatayo, T. 2009. Small ruminants as a source of financial security: A case study of women in rural,
southwest, Nigeria. Irvine, California: IMTFI Working Paper 2012–2.
Romer, P. 1994. New goods, old theory and the welfare cost of trade restrictions. Journal of Development Economics
43(1):5–38.
Tedeschi, L.O., Nicholson, C.F. and Rich E. 2011. Using system dynamics modelling approach to develop management
tools for animal production with emphasis on small ruminants. Small Ruminant Research 98:102–110.

ISBN 92–9146–396–5

Livestock and Irrigation Value chains for Ethiopian Smallholders

Livestock and irrigation value chains for Ethiopian smallholders project aims to improve the competitiveness,
sustainability and equity of value chains for selected high‐value livestock and irrigated crop commodities
in target areas of four regions of Ethiopia. It identifies, targets and promotes improved technologies and
innovations to develop high value livestock and irrigated crop value chains; it improves the capacities of
value chain actors; it improves the use of knowledge at different levels; it generates knowledge through
action‐oriented research; and it promotes and disseminates good practices. Project carried out with the
financial support of the Government of Canada provided through Foreign Affairs, Trade and Development
Canada (DFATD). lives-ethiopia.org
The International Livestock Research Institute (ILRI) works to improve food security and reduce
poverty in developing countries through research for better and more sustainable use of livestock.
ILRI is a member of the CGIAR Consortium, a global research partnership of 15 centres working
with many partners for a food-secure future. ILRI has two main campuses in East Africa and other
hubs in East, West and southern Africa and South, Southeast and East Asia. ilri.org
The International Water Management Institute (IWMI) is a non-profit, scientific research organization
focusing on the sustainable use of water and land resources in developing countries. It is headquartered
in Colombo, Sri Lanka, with regional offices across Asia and Africa. IWMI works in partnership with
governments, civil society and the private sector to develop scalable agricultural water management
solutions that have a real impact on poverty reduction, food security and ecosystem health. IWMI is
a member of CGIAR, a global research partnership for a food-secure future. iwmi.org
CGIAR is a global agricultural research partnership for a food-secure future. Its science is carried
out by15 research centres that are members of the CGIAR Consortium in collaboration with
hundreds of partner organizations. cgiar.org

EIAR

LIVES WORKING PAPER 2

Factors determining household
market participation in small
ruminant production in the
highlands of Ethiopia