Trader Behaviour and Performance in Live Animal Marketing in Rural Ethiopian Markets

In this paper, performance of a sample of 131 livestock traders in 38 rural Ethiopian highland markets was analysed in terms of their costs and margins, how these were influenced by their assets and trading practices, and the implications of the findings for policy were outlined. The paper is divided into three main sections: description of the profiles of traders, their assets, trading behaviour and practices; estimates of costs and margins for a set of recent transactions; and econometric analysis of the factors explaining differences in performance with a particular focus on transaction costs. Most traders used own capital as access to credit, especially formal credit, was limited. The livestock market was characterised by non-standardised products and lack of information in the public domain about supply, demand and prices. Consequently, livestock trading was largely a personalised business though brokers and regular buyers and sellers, a form of social capital, were sometimes used for gathering information, searching buyers/sellers, price negotiation, contract enforcement. Business relationships with these intermediaries were principally based on trust, without strong ethnic, religious or family ties. Although most transactions were conducted in physical presence of parties, contract violations were common, which were settled mainly through informal means as formal legal systems were either absent or time consuming. Estimated costs and margins of case transactions showed low returns, and losses in some cases. Market levies, transport, travel, and feeds were major items of variable cost, with some variation between cattle and shoats. Multiple regression analysis showed that traders' financial and human capital and trading practices like use of brokers and regular suppliers and customers had varying effects on margins and costs of cattle and shoat trade. Unstable price, multiple taxes, non-transparent tax system, limited access to credit and weak demand for the quality of the products traded were perceived by traders as major problems of marketing. All the problems were amenable to public policy for improving the market environment and marketing efficiency.