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Transaction Costs and Cattle Farmers' Choice of Marketing Channels in North-Central Namibia

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  • Shiimi, T.
  • Taljaard, Pieter R.
  • Jordaan, Henry
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    Abstract

    About 70% of the Namibian population depends on agricultural activities for their livelihood. Moreover, agriculture remains an important sector to Namibia because its national economy is widely dependent on agricultural production. Cattle producers in the Northern Communal Areas (NCAs) have an option to market their cattle via the formal or informal markets. Efforts have been made to encourage producers to market their cattle through the formal market; however, limited improvement has been observed. In this study a number of factors have been analysed to determine its influences on cattle marketing decisions. Factors influencing the marketing decision of whether or not to sell through the formal market are analysed using the Probit model. Factors influencing the proportion of cattle sold through the formal market on condition that a producer uses the formal markets to sell cattle are analysed with the Truncated model. Testing the Tobit model against the alternative of a two-part model is done using Cragg’s model. Empirical results revealed that problems with transport to MeatCo, improved productivity, accessibility to market-related information and access to new information technology, are some factors significantly affecting the decision of whether or not to sell through the formal market. Payment arrangements by MeatCo, animal handling, accessibility to new information technology, age of respondents and lack of access to marketing expertise, are some factors influencing the proportional number of cattle sold through the formal market. The results suggest that substantially more information is obtained by modelling cattle marketing behaviour as a two decision-making instead of a single decision-making framework.

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    Bibliographic Info

    Paper provided by African Association of Agricultural Economists (AAAE) & Agricultural Economics Association of South Africa (AEASA) in its series 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa with number 96641.

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    Date of creation: Sep 2010
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    Handle: RePEc:ags:aaae10:96641

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    Keywords: Cattle marketing; decision-making; formal markets; transaction costs; Livestock Production/Industries;

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    1. von Bach, Helmke J. Sartorius & van Renen, E. & Kirsten, Johann F., 1998. "Supply Response, Demand And Stocks For Southern African Beef," Working Papers 18057, University of Pretoria, Department of Agricultural Economics, Extension and Rural Development.
    2. Gabre-Madhin, Eleni Z., 2001. "Market institutions, transaction costs, and social capital in the Ethiopian grain market:," Research reports 124, International Food Policy Research Institute (IFPRI).
    3. Ehui, Simeon K. & Benin, Samuel & Paulos, Zelekawork, 2009. "Policy Options for Improving Market Participation and Sales of Smallholder Livestock Producers: A case study of Ethiopia," 2009 Conference, August 16-22, 2009, Beijing, China 51789, International Association of Agricultural Economists.
    4. Magingxa, Litha Light & Alemu, Zerihun Gudeta & van Schalkwyk, Herman D., 2006. "Factors Influencing the Success Potential in Smallholder Irrigation Projects of South Africa: A Principal Component Regression," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25348, International Association of Agricultural Economists.
    5. Ani L. Katchova & Mario J. Miranda, 2004. "Two-Step Econometric Estimation of Farm Characteristics Affecting Marketing Contract Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 88-102.
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