31
FACTORS INFLUENCING PARTICIPATION OF SMALLHOLDER FARMERS IN
LIVESTOCK MARKETS IN MBULU AND BARIADI DISTRICTS, TANZANIA
Mayala Nyanjige Mbembela Department of Management,
Moshi Co-operative University, Box.474, Sokoine Road, Moshi – Tanzania.
Emails: [email protected]; [email protected]
ABSTRACT This paper explores the factors influencing livestock market participation decision of smallholder livestock farmers in Mbulu and Bariadi Districts, Tanzania. The objective of the study was to sort out the key factors that influence smallholder farmers’ decision to participate in the livestock market as it has been pointed out that smallholder farmers rarely participate in the markets. A Probit regression model was employed for the analysis. The study used primary data collected from 333 smallholder farmers of the two aforementioned Districts. It was found that herd size, family labour, income from livestock, market information, livestock income and farm income are the main factors that influence smallholder farmers’ decision to participate in the livestock markets. Findings also indicate that, smallholder farmers would participate more and more in the livestock market, if herd size, availability of labour, market information, farm income and income from livestock are increased as these factors were found to be significant at p<0.05. It is concluded that, smallholder farmers in the study area are influenced by a number of factors as aforementioned. The uniqueness of this paper is that it examines the phenomenon of smallholder farmers’ in the study area from the viewpoints of market participation, which may create an opportunity for further constructive debate. Furthermore, development of market infrastructure, provision of marketing incentives to smallholder livestock farmers and development of an institutionalized marketing information service are recommended to enhance commercialization of livestock in the study area.
Key words: Tanzania, livestock, market participation Paper type: Research paper Type of Review: Peer Review
1. INTRODUCTION
Markets for livestock and livestock products are an important and integral part of the livestock sector
development especially in the developing economies (Mayala et al., 2018). There have been indications around the
world that demand for livestock products are growing stemming from human population growth, increased
urbanization, and rising income (FAO, 2017). With this enlarged rate of consumption in most developing countries
(Jabbar, Baker, and Fadiga 2010), the livestock sector offers substantial chances for economic growth and poverty
reduction, especially among the rural farmers. However, despite the increasing opportunity offered by the rapid
growth of demand for livestock, smallholder livestock keepers are often characterized by low levels of
participation in the markets coupled with a very low market off-take rate (Negassa, Rashid, and Gebre medhin
2011). Understanding the motives for smallholder farmers in Tanzania not aggressively participating in livestock
markets may help policy makers come up with novelties to deal with the problem and help to improve lives
among smallholder farmers in the rural farm households.
A number of studies using household data have attempted to reveal the factors affecting smallholder
farmers’choices to join in livestock markets (Musemwa et al., 2010; Nkonde 2008; Ehui et al., 2003; Lapar, et al.,
2003). Physical limitations on marketing include low population densities in rural areas (Nkonde, 2008),
remoteness of livestock producers from the main urban market centres, and poor road infrastructure that results in
East African Journal of Social and Applied Sciences (EAJ-SAS) Vol.1, No.1 Publication Date: November. 20, 2019
ISSN: 0856-9681
The current issue and full text archive of this journal is available at: http//www.mocu.ac.tz
Cite this article as: Mayala, N. M. (2019). Factors Influencing Participation of Smallholder Farmers in Livestock Markets in Mbulu and Bariadi Districts, Tanzania, East African Journal of Social and Applied Sciences, 1(1), 31-39.
Mayala, N.M., Factors Influencing the Participation of Smallholder Farmers in Livestock Markets in Mbulu and Bariadi Districts,
Tanzania.
East African Journal of Social and Applied Sciences [EAJ-SAS] Vol. 1, Issue 1, 2019 32
high transport costs are among the mentioned factors resulting into low smallholder livestock keepers to
participate in the markets (Gabre-Madhin, 2009). Improved road networks and marketing infrastructure such as
holding facilities may encourage farmers’ participation in livestock markets (Ouma, et al., 2003), though the effects
in some country studies are not significant (Ehui, Benin, and Paulos 2003). Sadoulet, and de Janvry (2000); and
Makhura et al., (2001) have mentioned high operation costs to be one of the main explanations for smallholder
farmers’ failure to partake in markets.
2. SMALLHOLDER FARMERS’ PARTICIPATION IN LIVESTOCK MARKETS
As the majority of the rural smallholder farmers in Africa originate in remote areas with poor road network and
market setup, operation costs rise not only due to high transport costs, but also due to the increased costs of
penetrating, screening, trading with, and monitoring distant exchange partners (Moyo, 2015). Increased
transaction costs also stem from failure to get market details such as grades and standards (Gabre-Madhin 2009).
Lack of market information increases the transaction costs incurred by smallholder famers and thus inhibits
participation in markets (Costales et al. 2007; Nkhori 2004; Ehui et al., 2003; Lapar et al., 2003; Makhura et al., 2001).
The effect of information irregularity thus puts smallholder famers in a weak negotiating position when dealing
with larger buyers and reduces their attractiveness when dealing with supply chains that are becoming gradually
formalized and advanced.
The purpose of keeping livestock has also been identified to have an effect on the likelihood of participating in
livestock markets (Musemwa et al., 2010). Smallholder farmers in less developed economies have multiple goals
for their livestock enterprise. Apart from cash benefits, domestic animals are meticulously associated to the social
and traditional lives of smallholder farmers for whom livestock possession guarantees variable degrees of
household economic stability (Mayala et al., 2017; Felicia et al., 2013). For instance, cattle, goats and sheep are kept
for different purposes such as meat, milk, manure, draught power, and ceremonies such as rituals, baptism and
weddings apart from being a source of income (Felicia et al., 2013). Livestock are also considered a communal
means of signifying wealth, strengthening relationships through bride price payment, and a social link (Ouma et
al., 2014). Therefore, farmers who attach more value to non-cash benefits, tend not to commercialize their livestock
production.
The Tanzania Livestock policy of 2009 and the vision 2025 recognizes the importance of addressing livestock
marketing challenges as a way of ensuring food security, employment creation, and increased incomes (URT,
2017). However, the lack of knowledge about smallholder livestock market limitations, business dynamics, and
reasons influencing the movement towards and out of markets often lead to imprudent interventions that have
little impact on improving household welfare (Ouma, 2014). It is anticipated that, findings from this study will
provide significant information to identify policy options for improving market participation and addressing the
marketing concerns that surround the livestock sector in rural Tanzania.
3. METHODOLOGY 3.1 The study area
The study utilized data from the household surveys for the year 2016 conducted in Mbulu and Bariadi districts in
Tanzania. The choice of the districts was based on the concentration of the number of livestock in the research area
being among those with high number of livestock in the country (URT, 2017). A cross sectional research design
was employed in gathering information using a questionnaire and key informant interviews. The sample frame
was smallholder livestock farmers who have been keeping cattle, goats and sheep (animals of interest for the
study). A total of 333 smallholder farmers were randomly selected in Mbulu (158) and Bariadi (175) making a
response rate of 86.7% respondents from the original sample size of 384 calculated using a formula of Fisher et al.
(1991) for population greater than 10000 (Appendix I).
3.2 Livestock Market Participation Decision Model
Smallholder livestock farmers in the study area do practice subsistence farming. Farmers are characterized with
limited participation in the livestock markets and by-products due to subsistence nature of livestock production
and farming systems. In recent years, farmers are adopting modern technologies and their productivity has
Mayala, N.M., Factors Influencing the Participation of Smallholder Farmers in Livestock Markets in Mbulu and Bariadi Districts,
Tanzania.
East African Journal of Social and Applied Sciences [EAJ-SAS] Vol. 1, Issue 1, 2019 33
improved. Accordingly, this enables them to participate in the market through selling their livestock and livestock
by-product surpluses. A smallholder livestock farmer’s decision to take part in market is influenced by many
socio-economic and farm specific characteristics (Gebreselassie, Sharp, 2008; Gebreselassie, Ludi, 2008;
Gebremedhin, Jaleta, 2010b). As per the study of Egbetokun and Omonona (2012), a Probit model is used in this
study to identify such factors being this study involving choice made by the farmers. The relationship between
market participation decision and the factors that affect the decision can be formulated as follows:
Yi = f (Xi, Di)…………………………………………. (1)
Where,
Yi = Market participation decision by a livestock smallholder farmers’ household
Xi = Continuous factors of market participation decision
Di = Qualitative factors of market participation decision (dummy)
In this particular study, livestock market participation decision by smallholder farmers is estimated as Y = 1 if the
household participates in livestock markets and Y = 0 otherwise as done by Gebreselassie and Ludi (2008).
The nature of market participation level, farmers are said to be market participant if their proportion of value sold
is of substantial value otherwise they are not motivated to participate in marketing (Goletti, 2005; Ohen et al.,
2013). Therefore, the author defined the binary response variable as Y = 1 if the farmer’s livestock and other by-
products sales exceed a threshold or critical level of Y*(75%) and Y = 0 if Y ≤ Y*. Here, the proportion of livestock
out of the total production by the livestock smallholder farmers in the respective year was used as the proxy of
market participation during data collection period (Moyo, 2010).
Furthermore, off-farm income, ownership of farm equipment’s, and number of livestock owned are highly
substantial asset variables as observed by Siziba et al. (2011). Socio-economic characteristics such as age, education,
farm size, ownership of some assets and farm output were observed to have positive effect on market participation
of livestock and other agricultural commodities (Olwande, Mathenge, 2012; Omiti et al., 2009; Randela et al., 2008).
Community assets have also been found to have positive relationship with market participation especially with
respect to access to credit and insurance (Cadot et al., 2006; Stephens, Barrett, 2011) and input use and access to
extension services (Alene et al., 2008). Additionally, Siziba et al. (2011) noted that extension training and
participation in research have positive effects on market participation. Following these studies, age, sex and
education of household head and that of the spouse were treated as socio-demographic aspects while farm size,
household labour, non-farm income earnings, access to credit, market information, on-farm income, income from
livestock, and non-farm income are used in Probit model as independent variables. Therefore, the specified Probit
regression model for detecting the factors that influence livestock market participation decision of smallholder
farmers is expressed as follows:
Yi = β0 + β1X1 + β2X2 + β3X3 + β4X4 + β5X5 + β6X6 + β7X7 + β8X8 + β9X9 + β10X10 + β11X11 + ui…………… (2)
Where,
Yi refers to market participation decision by a household (Y=1, if farmers participate in the market and Y=0,
otherwise); X1, X2,…......, X8 are explanatory variables that affect the market participation decision; β0,………,β11
are parameters to be estimated; and is the stochastic error term. The Probit regression model adds the condition of
normally distributed variables that can be expressed as:
Where,
Ii = β0 + β1X1 + …………+ β11X11 = utility index (latent variable); P (Y=1/ X) = the probabilityof market
participation; Z = the standard normal variable, and F = the standard normal CDF. Gujarati (2003) explains the
behaviour of a dichotomous dependent variable as we need to use a suitable CDF (cumulative distribution
function). CDF is a function, which can be used in the regression model where the dependent variable is
dichotomous taking the values of 0 or 1. Which is say, CDF of a random variable X is merely the likelihood that
takes a value less than or equal to X0, where X0 is some definite arithmetical value of X. The approximation model
Mayala, N.M., Factors Influencing the Participation of Smallholder Farmers in Livestock Markets in Mbulu and Bariadi Districts,
Tanzania.
East African Journal of Social and Applied Sciences [EAJ-SAS] Vol. 1, Issue 1, 2019 34
that occurs from the normal CDF is generally known as the Probit model. In the selection equation (2), that is, the
Probit model, the dependent variable is a dichotomous variable ‘participation decision in the livestock market
(represented as 1 when a household participates in the market and 0 otherwise’). The independent variables that
condition the participation of smallholder livestock farmers as adapted from literature are farm size, household
labour, non-farm activities, use of credit, market information; income from livestock, non-farm income and farm
income. These explanatory variables are specified in Table 1 with their predictable sign assumed.
Table1: Definition of Hypothesized Effects of Explanatory Variables on Market Participation
Variable Variable
Type
Variable definition and measurement Hypothesized Effect
on Market
Participation
Herd Size Continuous Number of animals held by the household +
Family Labour Continuous Number of family members involved in taking care
of the livestock (aged 15-60 years)
+
Off-farm Activities Dummy 1 if participated, 0 if otherwise -
Use of Credit
schemes
Dummy 1 if took credit for livestock management, 0 if
otherwise
+
Market Information Dummy 1 if accessible to market information, 0 if not +
Income from
Livestock
Continuous Total value of livestock and by-products sold in the
year (Tanzania Shillings)
+
Non-Farm income Continuous Total value of income from non-farm (Tanzania
Shillings)
+
Farm Income Continuous Total value of income from farm sold produce
(Tanzania Shillings)
+
4. FINDINGS AND DISCUSSION 4.1 Socio-demographic Characteristics of Smallholder farmers in the study areas
Data was collected from 333 smallholder farmers and analyzed to describe the appropriate socio-demographic
characteristics associated with livestock keeping. The key features of the variables used in the study are as shown
in Table 2.
Table 2: Socio-demographic characteristics of respondents related to livestock investment
Variables Min Max Range Medn Mean Mode Std.
Dev.
Var.
Age 24 102 78 49 50.82 42 11.783 138.834
Education level HH 0 14 14 7 7.07 7 2.336 5.456
Education level of Spouse 0 12 12 7 6.62 7 2.661 7.079
Cattle 1 462 461 50 64.13 20 66.510 4423.634
Goats 2 500 498 22.5 47.13 10 62.011 3845.355
Sheep 1 280 279 20 30.27 10 33.735 1138.072
As indicated in Table 2, it was found that the average age of the household head is 50. 82 years with maximum of
102 years and minimum of 24 years. This shows that, livestock keeping in the study area is undertaken mostly by
aged people. That being the case, decision to participate in livestock markets may be to the lower side as elders in
African context may concentrate more on the social benefit of animals like keeping herds for inheritance of the
future generations, meeting socio-cultural obligations like bride price, rituals and ceremonies as found out by
Felicia et al, (2013). The average education level of head of household is 7.07 while that of the spouse is 6.62 in
number of years spent at formal schooling. This may be an indication that smallholder farmers and their spouse
have primary, secondary or tertiary education. This may mean that, smallholder farmers with regards to market
Mayala, N.M., Factors Influencing the Participation of Smallholder Farmers in Livestock Markets in Mbulu and Bariadi Districts,
Tanzania.
East African Journal of Social and Applied Sciences [EAJ-SAS] Vol. 1, Issue 1, 2019 35
participation may be placed at a level where they are not able to have the skills to search for market information or
understand some marketing message contents as found by Osmani and Hossain (2013) in Bangladesh. It is
however evident from the statistics point of view that most farmers have a good experience in livestock keeping i.e
the number of years they have been keeping animals of interest in this study (cattle, goats and sheep). However,
the question will be on their participation in the livestock market. This is because, in the study areas, the tradition
is to keep livestock for the social reasons rather than the commercial reasons.
4.2 Regression Results of Market Participation Decision In order to attain the objective of the study, a number of socio-economic variables which are thought and
established from the literature to have an influence on smallholder farmers’ decision to participate in the livestock
markets are included in the Probit regression. The estimation results are presented in Table 3.
Table 3: Determinants of Market Participation by Smallholder Farmers
Variable Coefficient Std. Error Z-value P>|z|
Herd Size 1.03*** 0.01 3.17 0.029
Family Labour 1.04*** 0.02 2.67 0.299
Off-farm activities -0.52 0.60 -0.90 0.564
Use of credit schemes -0.31 0.71 -0.70 0.011
Market information 0.02*** 0.03 -0.70 0.463
Income from livestock 0.022*** 0.01 -2.62 0.067
Non-farm income 0.018*** 0.02 -0.82 0.067
Farm income 0.037*** 0.03 1.90 0.076
Constant 3.72 2.51 -1.92 0.071
Log likelihood = -22.082217; LR chi2 (8) = 82.03;
Prob. > chi2 = 0.0000; Pseudo R2 = 0.6670
Note: *** 5% significance level
Table 3 shows that, the likelihood ratio statistics as indicated by chi-square statistics are highly significant (P
<0.0000), suggesting that the model has a robust expounding power. The Pseudo R2 is 0.6670, indicating that the
condition fits well the variables included in the model explaining 67% inconsistency in the decision of smallholder
farmers for livestock market participation. the table also indicates that the estimated coefficients of the Probit
regression show that the explanatory variables age, herd size, family labour, income from livestock, income from
non-farm activities and farm income significantly influence the smallholder farmers’ decision to participate in the
livestock markets as they turned out to be positively significant at (p< 0.05).
Findings indicate that herd size is statistically significant at (p< 0.05) level and has positive influence on the
decision for households’ market participation. As the herd size increases, the probability of decision for
commercialization increases. This finding is in line with Okezie et al. (2012), Goshu et al. (2012) and Gebreselassie
and Sharp (2008). The explanation of the findings could be due to the role of herd size in boosting total production
level in terms of number of milk litres, cattle, sheep and goats head counts for sales of surplus by-products like
milk, hides and ghee. Again, farm households with large herd size have a large flexibility to sale as the number of
animals and by-products cumulatively results in large proportion of the same as compared with households with
less number of animals. Felicia et al. (2015) had opined that herd size influences the level of livestock
commercialization in a study in Ghana. This study substantiates their result.
Furthermore, the variable family labour has shown a positive influence, at a significance level of (p<0.5) on the
decision of smallholder farmers to participate in the livestock market. The coefficient indicates that, if a household
has one more active family labour, its probability to taking decision of participating in the livestock market
increases. Rural household rarely use hired than family labour to take care of the animals. Girls do better in
cleaning, milking and taking care of the calves as found out my Moyo (2015) and Ciamara et al, (2017) while boys
do better in sending herds for feeds and search for water. This finding is consistent with Gebre edhin and Jaleta
Mayala, N.M., Factors Influencing the Participation of Smallholder Farmers in Livestock Markets in Mbulu and Bariadi Districts,
Tanzania.
East African Journal of Social and Applied Sciences [EAJ-SAS] Vol. 1, Issue 1, 2019 36
(2010b). In that case, it appears rational since households with a large number of active household labour can
decrease their cost of production and produce surplus for them to be market-oriented.
Moreover, the coefficient of income from livestock is found to be statistically significant at (p< 0.05) showing
positive influence on the probability of households to participate in the livestock markets. Findings indicate that as
income from livestock of the smallholder farmer’s increases, the probability of farmers’ orientation towards
commercialization in the study area increases. Thus, farmers with high degree of participation in the livestock
market may be highly efficient in enhancing their productivity; consequently farmers have a more chance of
achieving surplus production for sale.
Furthermore, farm income as another important variable has resulted into being significantly positive impacting
on the decision of smallholder farmers to participate in the livestock market. At (p < 0.5) it has shown that,
households with high level of farm production (crops) tend to participate in the market than those with lower
production level. This means that farmers’ decision on livestock market entry is significantly related to the amount
of farm production levels. This may be due to the fact that households with higher number of animals and
products has much more chance to sell higher proportion of their animals and produce and thus, increase the
probability to participate in market due to the surpluses they have. This finding is comparable to the finding of
Moyo (2013), as well as Felicia et al. (2015).
The approximation of findings presented in Table 4, is also presented as the marginal effects of the variables
predicted probability of households’ market participation, evaluated at the means of the explanatory variables,
presented in Table 4. The marginal effects present the Probit regression providing the probability that a farm
household will participate in livestock markets. Table 4 provides the probability estimation for the likelihood of
market participation of a farm household given the statistically significant variables: herd size, family labour;
income from livestock, non-farm income and farm income. The marginal effect report of the Probit regression in
Table 4 shows that there is a probability of 11% that a smallholder farmer participates in the livestock market if his
herd size increases at mean value by one unit. Further, the marginal effect shows that there is a probability of
approximately 17% that a smallholder farmer participates in the livestock market if he/she succeeds to have a
mean of one additional active family labour. Likewise, the probability that a smallholder farmer will participate in
livestock market as a result of a one shilling increase, at mean value, if the farm income is given by 0.0001%. This
means that, if the farm income of a farmer increases by Shilling 1000, at mean value, then the likelihood of
participation in the market increases by 0.1%.
Table 4: Marginal Effect of the Explanatory Variable
Variable Coefficient Std. Error Z-value P>|z| x-bar
Herd Size 0.011*** 0.04 2.98 0.001 3.99
Labour 0.167** 0.08 2.20 0.023 1.19
Off-farm activities -0.112 0.13 -0.91 0.311 0.47
Use of credit schemes -0.070 0.10 -0.61 0.497 0.39
Market information 0.079*** 0.15 0.59 0.511 0.71
Income from livestock 0.006*** 0.00003 1.98 0.013 197.11
Non-farm income 0.0002*** 0.00002 -0.69 0.391 298.56
Farm income 0.00001* 0.00006 1.57 0.067 10344
Observed probability 0.4
Predicted probability 0.1075557
Log likelihood = -22.082217; Number of observation = 333; LR chi2 (8) = 82.03;
Prob. > chi2 = 0.0000; Pseudo R2 = 0.6670
Additionally, the marginal effect results of the Probit regression in Table 4 indicates that, if a smallholder farmers’
income from livestock increases by one Shilling, then there are 0.0006% likelihoods that he/she would take part in
the livestock market since the coefficient of this variable is positive to indicate the direction of the influence.
Mayala, N.M., Factors Influencing the Participation of Smallholder Farmers in Livestock Markets in Mbulu and Bariadi Districts,
Tanzania.
East African Journal of Social and Applied Sciences [EAJ-SAS] Vol. 1, Issue 1, 2019 37
5. CONCLUSION AND RECOMMENDATIONS
From the findings of the study, it seems that smallholder farmers are influenced by a number of factors in livestock
marketing making for them to fully commercialize. Smallholder farmers in the study area are likely to contribute
to economic growth and development if they participate in the livestock markets. Findings indicate that among the
eight tested factors, six turned to be positively significant influencing the decisions of smallholder farmers to
participate in the livestock markets. As herd size was found to be a significant factor, the study concludes that, for
small holder farmers to have surpluses to sale coming out of the economies of scale by having an adequate number
of the animals in question. On the other hand, family labour was also found to be a significant factor influencing
smallholder farmers to participate in livestock market. It is concluded that, indeed, rural household depend on
family labour than hired labour as it is a practice from urban and large scale livestock keepers. It is also concluded
that, market information is crucial for smallholder farmers about their decision to participate in the livestock
markets. Findings shows that information is an important aspect for them to participate as income from livestock,
non-farm income and farm income has turned out to be positive and significant factors. Which means that, farmers
are in need of the income from all the three mentioned economic activities, hence information is important.
It is recommended that efforts should be made at family level to balance the need of family labour and other
important social aspect functions. As it has been found in the socio-demographic findings, the number of years
spent at school for the head of households and spouses is less; it could translate into children not being sent to
school as it is the case for most pastoralist communities around the world. More awareness campaigns on the
balance of the two aspects should be provided to smallholder in the study area. Furthermore, the government
should ensure that more information about price, business opportunities, networks with other livestock business
operators are built to support the smallholder farmers in the study area. Provision of marketing incentives to
smallholder livestock farmers and development of an institutionalized marketing information service are also
recommended to enhance commercialization of livestock in the study area.
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APPENDIX 1: Calculation of Sample Size
The sample size was 384 determined using the formula of Fisher et al (1991): for population greater than 10000
n = Z2 pq
d 2
Where-:
n - The desired sample size
Z - The standard normal deviation, set at 1.96, which corresponds to 95% confidence level
p – Skewness level estimated at 50 percent
q = 1.0 – p
d = the degree of accuracy desired, here set at 0.05 corresponding to the 1.96.
In substitution, n= 1.962 x 0.5 x (1-0.5) = 384
0.052