Access to markets, weather risk, and livestock production decisions: Evidence from Ethiopia

Despite several studies showing the effect of access to markets and weather conditions on crop production, we know quite little on whether and how livestock production systems respond to variation in weather risk and access to markets. In this paper, we study whether and how livestock production responds to access to markets and varying weather risk. We also explore whether such responses vary across livelihood zones and livestock production systems. We study these research questions using information on the livestock production, ownership, and marketing decisions of households in Ethiopia. We find that households living close to markets are more likely to engage in market-oriented livestock production and use modern livestock inputs. We also find that households exposed to more unpredictable weather are less likely to engage in livestock production for markets. Rather, they are more likely to engage in livestock production for precautionary savings and insurance. Furthermore, greater rainfall uncertainty influences livestock portfolio allocation towards those types of livestock which can be easily liquidated, while also discouraging investment in modern livestock inputs. However, these responses and patterns vary across livelihood zones and production systems - most of these stylized responses and impacts are more pronounced in the arid and semi-arid lands of Ethiopia, where livestock herding remains a dominant source of livelihood. Those households relying only on livestock production seem more sensitive and responsive to weather risk and weather shocks. The heterogeneity in responses to and impacts of weather risk among farming systems and livelihoods highlights the need for more tailored livestock sector policies and interventions.