Livestock as a Buffer Stock in Poorly Integrated Markets

Livestock holdings in rural areas of the West African semiarid tropics are often substantial, yet the evidence for livestock sales in response to shocks is mixed. This paper revisits farm households’ ability to cope with adverse shocks via livestock sales. Based on data covering Burkina Faso’s 2004 drought, we find that livestock sales increase significantly in response to drought, with households citing the need to finance food consumption. At the same time, we find no effects of rainfall shocks on revenues from livestock sales. We show that this seemingly contradictory finding is largely due to a decrease in livestock prices during droughts. Our findings suggest that precautionary saving, while costly as a coping strategy in poorly integrated markets, is nevertheless common in this setting.