ECONOMIC CONSTRAINTS ON SHEEP AND GOAT PRODUCTION IN DEVELOPING COUNTRIES

N. Gutierrez-A

INTRODUCTION

Sheep and goats are important livestock species in developing countries. Of the world's 1,614million sheep and 475 million goats, 65% and 95%, respectively, are located in developing countries. Fifty-three percent of the total small-ruminant population in the developing countries is found in Asia, particulalry in India and Pakistan, 33% in Africa, and 14% in Latin America (FAO, 1984).

Goats are hardy and well-adapted to harsh climates. Due to their grazing habits and physiological characteristics, they are able to browse on plants that would normally not be eaten by other livestock species. Thus, the presence of goats in mixed species grazing systems can lead to a more efficient use of the natural resource base and add flexibility to the management of livestock. This last characteristic is especially desirable in fragile environments.

Sheep and goats contribute to a broad range of production systems. The most common system throughout the developing countries involve either the extensive system with large herds and/or flocks grazing on arid and semi-arid rangelands or the intensive system with smaller herds and/or flocks kept in confinement, mostly in the humid tropics. Both systems are characterized by low input use (Safilios-R, 1983). Sheep and goats are important in development because of their ability to convert forages and crops and household residues into meat, fibre, skins and milk. The economic importance of each of the products varies between regions, especially in the developing countries. In terms of total output, sheep and goat products are the most important in developing countries where 45% of all sheep meat, 54% of all sheep milk, 93% of all goat meat, and 73% of all goat milk are produced (FAO, 1981).

In the last decade, small ruminants in developing countries were less productive than those in developed countries (Winrock International, 1983). However, the total product from small ruminants increased in developing countries because their numbers increased. This indicates that if developing countries could increase herd productivity, they could increase production. However, to increase production in developing countries, existing constraints must be surmounted. There are three types of constraints to increasing sheep and goat production: biological, economical, and cultural. This paper will discuss some economic factors that have affected the efficiency of production, document select cases, and offer some solutions to the problems.

Winrock International Res. and Training Centre,
Morrilton, Arkansas, U.S.A.

PRICES

At a subsistence level people eat what is available. As personal income increases, people's food preferences change and the change in food preference creates a demand, which is reflected by relative prices (Crotty, 1980).

Meat Consumption

Lack of demand constrains production. Low-average consumption rates do not give producers enough incentive to invest to increase their production. The consumption rates of sheep and goat meat are greatly affected by the prices of other meats available in the market, such as beef, pork, chicken, and fish. During the 1962 to 1970 period, sheep and goat meat prices in developing countries tended to be similar to beef prices.

In two of the three regions studied, the price ratio of cattle to sheep and goats was close to one (Table 1). The ratio results show a slight decrease in all three regions. This means that beef prices have increased and/or sheep and goat prices have decreased. On the average, sheep and goat meat does not differ much in price from beef except in some Muslim countries where sheep and goat meat is significantly more expensive. There can be great variation in relative prices between countries as well as within countries (Winrock, 1983). In countries without religious restrictions and where traditional meat preference leans heavily toward beef, this price similarity discourages increased sheep and goat production. By using new technology, which is dependent upon effective extensionists, sheep and goat production efficiency could be quite dramatically increased so that lower production costs and producer profits would lower the price in the market place. As a result, a lower retail price would be attractive for increasing the consumption of sheep and goat meat and creating a supply/ demand response.

Between 1967 and 1977, meat consumption in the world increased significantly at an average annual rate of 3 million tons. On a percentage basis, the greatest increased occurred in the developing regions for all species but the increases were higher for poultry and small ruminants (Wheeler et al., 1981). However, sheep and goat meat was the only type that showed a worldwide decline in per capita consumption - from 2.01 kg per year for 1969 to 1971 to 1.80kg for 1980 to 1982 (Figure 1). The developed countries reduced their per capita sheep and goat meat consumption from 3.53 to 3.0kg in the same period, centrally planned economies decreased from 1.51to 1.34kg, and developing countries showed a stable consumption of about 1.6kg. However, the developing-country share of the world's sheep and goat meat consumption increased considerably. Per capita consumption of sheep and goat meat in developing countries is similar to that of centrally planned economies and about half the per capita consumption in developed countries.

Although population growth accounts for most of the increase in production in these countries, an increase in per capita consumption would reflect a higher income level. In general, increases in per capita demand for meat may be due to higher income levels (total income or redistribution) because high income elasticities are common in demand functions for meat products. Product-price mechanisms could be as effective as changes in income to increase consumption depending on the meat price elasticity of demand and supply (Jarvis, 1969; Iver, 1971 & Gutierrez et al., 1982).

There is empirical evidence to demonstrate that sheep and goat production in certain regions is very sensitive to changes in price and in weather conditions (Souza-N. et al., 1984). Results showed that the supply of slaughter animals decreased in the short-term when sheep and goat meat prices increased, but in the long-term the supply of slaughter animals increased. Souza-N. et al.,(1984) also found that compared to other agricultural products (crops), sheep and goat supplies adjust more slowly to changes in prices. These facts should be considered when policymakers attempt to stimulate production via price policy, reduce domestic price fluctuations, or promote price stabilization of the market.

The low production rate of sheep and goats because of poor producer management is a serious restriction to the rate at which the supply responds to increases in prices and costs and translates into low return to investment. Sheep and goats are not inherently poor producers. In fact, their biological potential is higher than cattle. Because of the high relative cost of inputs, few producers in developing countries are willing or able to make the necessary investment inputs to increase the production of their herds. The result is that sheep and goat production tends to be a low investment-low output activity. However, producers might be encouraged to improve their production if prices for sheep and goat meat and their input costs were favourable relative to beef, pork, and chicken.

The governments of the developing countries, because of high inflation rates, intervene in the food market by establishing price controls or subsidizing various products to keep retail prices low. Since meat and other animal products are an important part of the family expenditures, any intervention in the meat market will have major impact on the cost of living. These “cheap food” policies do not promote production or attract new producers into the activity and keep the marginal producers from making the additional investments needed to improve overall productivity.

On the contrary, if there is favourable price treatment for sheep and goat meat it could possibly improve the price ratios relative to other substitute products (beef, pork, etc.).But the increase in demand would lead to a similar effect in production, even without solving the herd productivity problem. In this case, increases in animal population could make better use of the existing facilities by increasing the carrying capacity of present livestock areas, or by incorporating marginal lands.

Seasonal changes and feed shortages

The seasonal variation in meat prices is often influenced by environmental conditions. In the semi-arid regions, where a large proportion of the sheep and goat population is located, there is a large difference in the amount of feed available in the wet and dry seasons. Therefore, during the dry seasons and pursuant feed shortages, producers are forced to reduce the total number of animal units. This creates an excess supply that, in turn, causes a decrease in prices. Depending on the availability of feed on the farm, an environmentally induced herd reduction because of drought may change the mix of species. In some regions, during drought periods, cattle are sold off first, followed by other species. Goats or other hardy species are last to be reduced in number because of their better adaptation to harsh environmental conditions and in some cases may even increase (Queiroz et al., 1985).

To counteract these seasonal variations, management at the farm level needs to be improved by adjusting animal numbers and species mix, by improving the range conditions, or introducing some alternative supplement during the drought periods. However, the cost of supplement limits its use unless credit or some other type of support is available.

TRADE

Additional constraints on the increase of sheep and goat production are international meat trade bottlenecks and the limitations imposed by the shortage of foreign exchange, common in most of the developing countries in the last decade of oil price increases. In the last two decades the world trade in sheep and goat meat increased considerably, but still the proportion traded did not reach 1% of total world production. Developing countries have the major share of the small ruminant trade in the 1980's. Table 2 shows how vulnerable the sheep and goat meat market is with five major countries purchasing about 62% of the total imports and only 8 to 10 countries serving as major exporters. During the 1970's international beef prices tended to decrease because many developing countries imposed austerity measures during the oil crises to cope with the scarcity of foreign exchange, which led to reduced consumption of imported items. The economic recession in the 1980's also did not help to improve world prices for primary commodities. However, Argentine and Australian markets have recovered in the last decade. There have been erratic price changes and price differences between major exporters that reflect the nonprice factors affecting the world trade of meat. Sheep and goat meat prices are assumed to follow beef prices in the principal trade centres (Table 3).

Policies

Most developing countries have maintained import protection policies and imposed export taxes that have led to overvalued exchange rates. This protectionism has been a disadvantage for the agricultural sector (Valdes and Nores, 1978) because the protected sectors are favoured by higher profits. As a consequence, investment resources are transferred away from agriculture, especially livestock, where the low efficiency of production and low returns prevail (Fitzhugh and De Boer, 1981).

Future increases in the export of sheep and goat meat from developing countries are limited by several factors:

-  Health and sanitation restrictions are imposed by the major importers to limit the flow of live animals.

-  Anticipated increases in domestic demand caused by population growth will prevent surpluses for export.

-  Major exporters such as Australia have already established their own trade channels making it difficult for other countries to enter the sheep and goat meat market as seasonal surpluses occur (Winrock, 1983).

-  The seasonal fluctuation in supply creates problems for slaughter-houses, shipping, and coordination with principal trading regions.

-  Most slaughterhouses and grading and packing systems have no export standards (Simpson, 1984).

-  Many countries with potential for exporting sheep and goat meat lack the infrastructure, especially during the rainy season, to transport livestock or livestock products from the remote rural communities, where producion is concentrated.

The area of the world with the best prospect for being a large importer of live small ruminants and/or meat is the Near East. All indicators showed continuous increases in the 1970's with tendencies to decrease in the 1980's because of shrinking petroleum profits.

CAPITAL

Sheep and goats have a dual role in production: 1) as a capital investment for producing breeding stock and 2) as a food commodity. Thus the small-ruminant producer faces two different production alternatives for the allocation of his capital investment (Jarvis, 1969; Iver, 1971; Ospina and Shumway, 1980 & Gutierrez-A. et al.,1982). Comparing sheep and goat investments with investments for cattle, small ruminants require considerably less capital per head. The monetary returns, as reported in some major producer areas, are comparable to other livestock enterprises (Gutierrez-A. and De Boer, 1985).

Constraints on herd and flock size

The question is : why have small ruminant numbers not grown at a faster rate than other species, especially cattle? What is constraining the size of the flocks and herds? There are several possible answers:

1) The most important is that low productivity assures low returns on capital investment; 2) and the second constraint is the lack of available capital even when good production management could increase the number of animals in the herd. This latter limitation can be explained by the fact that most of the sheep and goat producers are small producers or landless labourers and so they have limited resources to use as collateral for production credit. The producer becomes a victim of a vicious circle since he has no way to acquire more collateral without first getting a loan.

In transhumant/nomadic production systems the production credit problem is even worse because the nomadic nature of the producers makes them difficult to keep track of. In addition to their questionable economic status is the problem that they are seldom represented in local government, making them nearly powerless in the planning of national policies.

Although the lack of good management practices constrains the increase in the size of herds and flocks, another factor is the physical incapability of the small producer to herd large numbers of animals, as is the case under extensive grazing. To control an increasing number of animals, producers often consider using fences. But the price ratio of fence to land is very high, especially on poor quality land, and so the low return from a capital investment in fences also constrains the herd size More research is needed to find cheaper fencing, such as portable fences, electric solar-activated fences, and other kinds.

Risk as a constraint

Since sheep and goats are very well adapted to harsh environmental conditions, producers use them to diversify their livestock management portfolio and to decrease their risk in case of adverse weather conditions such as drought. At the same time, a herd of small ruminants is as good as money in the bank in case other species have to be sold off to adjust the number of animal units to the lack of feed during a drought. Small ruminants protect the producer's capital against inflation and enable him to restock his farm when the environmental conditions improve. Another factor that decreases the investment risk in sheep and goats is their much shorter reproduction cycle that gives them the capability to rebuild population numbers much faster than cattle after any kind of reversal.

LABOUR

Lack of improvement in the productivity of sheep and goats is often attributed to the lack of skilled labour. Most of the labour is provided by the family. The person responsible for the day-to-day care varies widely depending on cultural factors, the number of animals, the production system (extensive or intensive) and other reasons. Young children usually take care of small or backyard herds. The role of women in the case of sheep and goats varies considerably depending on the country, region, ethnic groups, etc. In many places women not only take care of the animals but also own them and market them (Safilios-R. 1983). As production systems become more sophisticated, so do management skills. This is one of the most serious constraints to achieving higher production rates. Safilios-R. (1983) pointed out the special need for training and technology transfer, adapted to women's schedules, that would cover all aspects of production management. The same information needs to be extended to men also on both the local and national levels.

Sheep and goat production is also affected by seasonal labour, especially if the farm includes crops. During planting and harvesting, available labour is used in the fields. This fact encourages the development of a livestock production system that would require minimal labour during the labour-intensive periods of crop production.

CONCLUSION

Most of the world's sheep and goats are produced on mixed-species farms rather than in species-specific units. These various mixed species/ crop production systems have been identified and described in several countries (Devendra and Burns, 1970; Devendra, 1981; Hart et al., 1982; ILCA, 1979; Winrock International, 1983; McDowell and Hilderbrand, 1980; Orlove, 1980; Knipscheer et al., 1983; Gutierrez-A. et al., 1985). Under crop-livestock production conditions small ruminants compete for the available resources (land, capital, and labour) with the other farm enterprises. The complex interactions of the different production components on the farm need to be studied well. Until now, technological development studies of small-ruminant production as it relates to other farming systems have been limited. Therefore, the target, in terms of research, has to be integrated production systems rather than isolated sheep and goat components. By using a multidisciplinary research approach, the problem can be addressed in a realistic and practical way.

The problems of sheep and goat production can neither be efficiently nor successfully solved until research concentrates on studying all of the related and interrelated components involved. For too long research has focused on one discipline at a time, ignoring the developing country's culture, environment, educational level of it's producers, and the availability and dependability of local technology transfer.

It is important to know that an increase in sheep and goat activity in an integrated system could increase the total productivity of a farm through more efficienct labour and available resources and generate more income per unit of time (McDowell and Hilderbrand, 1980; Queiroz et al., 1985). However, multidisciplinary research is indispensable for determining the right level of integration to ensure sustained productivity and stability in the various ecosystems.

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TABLE 1. Average farm gate price ratios in cattle: small ruminants (kilogram basis)

Source: Winrock International (1983)

TABLE 2. Trade in small ruminants

Source: FAO, 1983

TABLE 3. Export prices of beef ^a

^a F.O.B. unit value, frozen, boneless. Source: World Bank, 1985

Fig. 1. Annual per capita consumption of sheep and goat meat, grouped by countries, 1962–1982.

Source: FAO, 1983, 1983a