An Economic Analysis of Small Ruminant Marketing in Karnataka State of India

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1 IOSR Journal of Agriculture and Veterinary Science (IOSR-JAVS) e-issn: , p-issn: Volume 10, Issue 5 Ver. II (May. 2017), PP An Economic Analysis of Small Ruminant Marketing in Karnataka State of India 1 Shivakumara, C., 2 Reddy, B. S., 3 Suresh S., Patil and 3 Satihal, D. G. 1 Ph.D scholar, Dept. of Agril. Economics, UAS, GKVK, Bengaluru , India 2 Asst. Professor, Dept. of Agril. Economics, AC, Kalaburgi, UAS, Raichur , India 3 College of Agriculture, Bhimarayanagudi, UAS, Raichur , India shivugarje@gmail.com Abstract: Small ruminants are associated with the rural poor. They play a big role in supporting the livelihood system of the poorest men and women livestock keepers, especially in the marginalised areas. Sheep and goat marketing in India is highly unorganized. The general features of sheep and goat marketing are those markets are locally known as hat/animal fair/shandi conduct weekly or bi-weekly at village, block or town and city level. The study is conducted in Tumakuru, Chitradurga, Belagavi and Kalaburagi districts of Karnataka. Total sample size of 60 market intermediaries were chosen. The technique of logit regression is used to know the factors determining sale price of sheep and goat. The results of the study revealed that, per animal marketing cost incurred by sheep and goat farmers was The farmers realized less than 82 per cent of the price paid by the butcher and wholesaler. However, the magnitude of price spread in channel-iv (17.18%), channel-ii (18.45%) and channel-i (18.45%) were found to be higher than that of channel-iii (8.40%). Consequently, the proportion of costs and margins of intermediaries in respective channel were considerably higher than that of channel-iii, mainly due to only involvement of local trader between farmer seller and farmer buyer. The physical characteristics namely, body weight, breed, sex were influenced significantly on sale price of goat and sheep. The other factors, existence of large number of buyers in the market, festivals and season were also influenced. Key words: Market intermediaries, Margin, Sale price, Cost = I. Introduction Small ruminants are associated with the rural poor. They play a big role in supporting the livelihood system of the poorest men and women livestock keepers, especially in the marginalised areas. Inspite of its livelihood contribution and contribution to the livestock economy, this sub-sector received only diminutive attention in the country. Small ruminants make an important contribution to the sustenance of small and marginal landholders and landless rural people in India. They also make a substantial contribution to the rural economy. At the national level, small ruminants account for 14 per cent of the meat output, 4 per cent of the milk output and 15 per cent of hides and skin production in the country. But it receives only about 2.5 per cent of the public spending on livestock sector, which is much less than the share of small ruminants in the value of output of the livestock sector. The demand for animal protein in India is increasing at a very faster rate. The annual meat consumption has increased from 3 million tonnes in 1983 to 4 million tonnes in 1993 and the projection for 2020 is 8 million tonnes. Human population growth, increasing urbanization and rising incomes are predicted to double the demand for, and production of, livestock and livestock production by Trends reveal that though mono-gastrics have become important meat suppliers over time, the role of small ruminants in meat supply is growing in India as meat of these species are still the most preferred. Goats are widely distributed across all agro-climatic regions of the country. Their density is the highest in the irrigated ecosystem followed by hill and mountain ecosystem. Concentration of goats is mainly in the states of West Bengal, Rajasthan, UP, Maharashtra, Bihar and Madhya Pradesh. Sheep population is generally found in the arid and semi-arid areas of Western India, Deccan Plateau and Western Himalayas. About 60 per cent of sheep in the country are concentrated in five states, namely Andhra Pradesh, Rajasthan, Karnataka, Tamil Nadu, Jammu & Kashmir and Maharashtra. Sheep density is the highest in the arid ecosystem and least in the irrigated system. Sheep and goat marketing in India is highly unorganized. The general features of sheep and goat marketing are those markets are locally known as hat/animal fair/shandi conduct weekly or bi-weekly at village, block or town and city level. Most of the sheep and goats reared by the farmers are sold in these markets through middlemen. The major activities along the marketing chain are: procurement of animals at primary market from producers, selling these animals at local market and terminal markets through wholesalers/commission agents. At primary level, majority of sellers are sheep and goat farmers. The major DOI: / Page

2 buyers from such markets are other sheep and goat keeping farmers who purchase animals for stock replacement and increasing herd size or fattening. Local butchers also visit this market to purchase sheep and goats for slaughter. The itinerant traders are the main actor of such markets. They visit 3-4 villages every day and collect animals per month. They keep animals up to a week and sell out them on very next market day with the net profit of per animal. The secondary markets are basically distribution markets. Animals sold/purchased are transported to distant markets. (Dixit and Singh, 2014). In most of the places, sheep and goats are traded in the cattle/goat fairs organized at conventional places through market committee at fixed intervals. A large part of the consumer s costs are due to inefficient slaughter operations and markets and high transportation costs. Sheep and goat marketing is one of the most unexplored areas. Documentation on number of sheep and goat markets, fair/hats and their frequencies, status of buyers and sellers, volume of trade, nature of competition, role of middlemen and finance hardly been attempted. Understanding the market and preparing itself to respond to emerging market trends would be the prime instrument for enhancing the domestic livelihood opportunities in the sheep and goat sector. There is an absolute necessity for market oriented sheep and goat production system. Need for the present study Karnataka is one of the important sheep and goat producing state, it contributes around seven per cent to countries sheep and goat population. Sheep and goat rearing is the backbone of the economy of small and marginal farmers. Large number of local and improved sheep and goat breeds is also available, majority of small, marginal and landless famers depends on sheep and goat for their livelihood on one hand. There is a good demand for meat and meat products, wool and milk. However, no comprehensive studies on production and marketing aspect of sheep and goat have been conducted in Karnataka. II. Methodology Karnataka state extends about 750 km from north to south and 250 km from east to west and covers an area of km 2. As per 2011 census, the state has a population of 6, 10, and 95,297. Karnataka stands second position in sheep population with 9.57 million and thirteenth position in goat population with 3.5 million (Annon, 2012). Selection of district The selection of districts was based on highest number of sheep and goat population in the state. The top four districts having highest population namely Tumakuru, Chitradurga, Belagavi and Kalaburagi were chosen. For studying marketing aspects, four markets namely, Chikkanayakanahalli, Hosadurga, Ramadurg and Shahapur were chosen, based on the size of the market for sheep and goat. From each of the selected market, 5 village traders cum local traders, 5 distant traders and 5 wholesaler cum butchers constituting 60 market intermediaries were chosen and interviewed personally using structured and pretested questionnaires to elicit required information. Analytical tools employed Logit Model Logistic regression is a method for determining whether each set of independent variables has a unique predictive relationship to a qualitative dependent variable. Independent variables may be dichotomous, polytomous, or interval. Binomial Logit Regression model is one in which the dependent variable is dichotomous in nature. i.e., Yes/No, Pass/Fail Odds ratio is the ratio of the probability of an event occurring to the probability of it not occurring. An odds ratio of 1 implies that the probability of occurrence of an event is same as probability of non occurrence of the event. We cannot use Ordinary Least Squares (OLS) for the estimation of parameters in logistic regression because of the violation of the Homoscedasticity assumption. Here we go for Maximum Likelihood Estimation (MLE). In OLS we choose those values of β o and β i which minimize the sum of the squared deviations of the observed values of Y from the predicted values based upon the model. But In a very general sense the method of maximum likelihood yields values for the unknown parameters which maximize the probability of obtaining the observed set of data. In order to apply this method we must first construct a function called likelihood function which gives the total probability of particular sample being observed. Take the partial derivatives of the likelihood function w.r.t. parameters which we want to estimate and equate it to zero. Solve the partial derivatives for unknown parameter to obtain the MLE. A logit regression model was estimated to identify the factors, which determine sale price of sheep and goat. The dependent variable is binary taking a value of 1 for higher price, 0 otherwise. DOI: / Page

3 P i = E(Y=1/X i ) = 1/1+e - (ß 1+ ß i X i) Where, P i = Probability that Y=1, i.e. higher price of the animal E = Base of natural logarithm X i = Sum of X 1 to X 8 Factors ß i = Coefficients of the explanatory variables, X i b i = Coefficient to be estimated In present study the logistic regression is fitted as fallows. X i = a+b 1 X 1 + b 2 X 2 + b 3 X 3 +b 4 X 4 + b 5 X 5 + b 6 X 6 + b 7 X 7+ b 8 X 8 X 1 = Breed of the animal (Cross breed=1, Local=0) X 2 = Age of the animal (Months) X 3 = Colour (Black=1, Otherwise=0) X 4 = Weight (Kg) X 5 = Sex of the animal (Male=1, Female=0) X 6 = Existence of large number of buyers (No.) X 7 = Festival (Festival =1, Otherwise=0) X 8 = Season (Season=1, Off-season=0) III. Results And Discussions Marketing performance of sheep and goat farmers The selection of marketing channel becomes imperative for the farmers since the real benefit accrued to them mainly depends upon choice of channel for disposal of their animals. The channel selected by them must account for minimum marketing cost and ensure higher share of consumer s rupee. In the study area, following four important marketing channels were identified in marketing of sheep and goat. Channel-I: Farmer-Village trader-wholesaler/butcher Channel-II: Farmer-Local trader-wholesaler/butcher Channel-III: Farmer-Local trader-farmer Channel-IV: Farmer-Wholesaler-Distant trader Marketing cost incurred by farmers The marketing cost associated with delivering produce or service from farmers to consumers. The marketing cost of farmers includes expenses associated with transportation, feeding, market fee, middlemen charges, personnel expenditure and loading and unloading charges. The average cost of marketing incurred by sheep and goat farmers is presented in Table 1. The cost incurred per animal was per animal across different channels. Out of total marketing cost, transportation cost formed major component (35.85%) followed by feeding cost (26.34%), middleman charges (18.88%), personnel expenditure (15.27%), market fee (2.24%) and loading and unloading charges (1.38 %). Table 1: Marketing cost incurred by farmers ( /animal) Particulars Value Percent a. Transportation cost b. Loading and unloading c. Feeding cost d. Market fee e. Commission f. Other expenses Total cost An appraisal of components of marketing costs clearly revealed that, transportation charge form the most significant constituent of the total marketing cost incurred by the farmers. Similar results were obtained for goats in Arun pandit; (2005) study on efficiency of male goat markets in the central alluvial plains of West Bengal. This was mainly due to non availability of adequate transportation facilities in the villages and higher cost ranging from 20 to 50 per animal. However, feeding cost also formed major component of marketing cost because of inadequate market facilities wherein feed and fodder were not available. DOI: / Page

4 Marketing costs of intermediaries, margins and price spread In general, among all the selected channels mentioned above, price spread was found to be marginally higher in both channel-i ( ) and channel-ii ( ) compared to channel-iv ( ) and channel- III ( ). However, magnitude of price spread was found to be lower in channel-iii compared to other channels indicating higher share of producer s in wholesaler/butchers (91.60%) price. Similarly, the producer share in consumer rupee was 81.55, and per cent in channel-i, II and IV respectively. Thus producer s share in the price paid by the wholesaler/butcher varied marginally across different channels. Out of the total price spread, margin accrued by different market functionaries formed major component in all channels ( to 646.3/animal) followed by total cost of marketing ( to / animal) incurred by different market intermediaries. The cost incurred by market intermediaries indicated that farmers spent per animal followed by village trader ( ) and wholesaler ( ) in channel-i. Whereas, margin earned by village trader was and wholesaler/butcher was It is important to note that, marketing margin earned by wholesaler was higher in channel-ii ( /animal) compared to channel-i ( /animal) and channel IV ( /animal). Further, wholesaler have incurred , and 190 per animal in channel-ii, channel-i and channel-iv respectively and details are mentioned in Table 2. In general, farmers realized less than 83 per cent of the price paid by wholesaler and butcher in all the channel, except channel-iii indicating higher marketing margin accrued by the intermediaries in the marketing process. However, magnitude of price spread was found to be higher in channel-i (18.45%), channel-ii (18.45%) and channel-iv (17.18%). Thus, producers share in price paid by the wholesaler and butcher varied among different channels. Similar results were reported by Solomon (2006) and Ramesh et al (2012). In sheep and goat marketing, one of the causes for higher marketing margins in most of the channels was involvement of large number of middlemen and existence of weekly and by-weekly market days and also lack of infrastructure facilities in the weekly/bi-weekly market held in small corner of APMC s in the state. Table 2: Marketing costs, margins and price spread ( /animal) Particulars Channel- I Channel- II Channel- III Channel- IV I. Sale price of animal a. Farmer b. Village trader c. Local trader d. Wholesaler/Butcher e. Distant trader II. Purchase price of animal a. Farmer( Consumer) b. Village trader c. Local trader d. Wholesaler/Butcher e. Distant trader III. Marketing cost incurred a. Farmer b. Village trader c. Local trader d. Wholesaler/Butcher e. Distant trader IV. Market margin earned a. Farmer b. Village trader c. Local trader d. Wholesaler/Butcher e. Distant trader V. Price spread VI. Producer share in Wholesaler/ Butcher price (%) Factors determining sheep and goat sale price The factors determining sale price of sheep and goat are estimated by using binary logistic model. The estimates of determinants of sheep and goat price (Table 3) revealed that variables included in the model explained more than 71 per cent variation in sheep and goat price as indicated by the coefficient of multiple determination (R 2 =0.71). The calculated z value is statistically significant. DOI: / Page

5 Table 3: Factors determining sale price of sheep and goat (n=120) Determinants Regression coefficient Odds Ratio a. Breed b. Age/teeth -0.46* c. Colour -7.78** d. Weight 0.416* e. Sex f. Existence of large number of buyers g. Festival h. Season R 2 value 0.71 Cases correctly predicted 112 (93.33%) Note: * = Significant at 10% level ** = Significant at 5% level *** = Significant at 1% level Among the predicted variables included in the model, breed, weight, sex and festival have influenced sale prices of sheep and goat. The odds ratio of breed (1.386) indicated that improved breed will influence 1.39 times on higher sale price of sheep and goat. In otherword, rearing of improved breed may fetch 1.38 times higher price than the local breed. Similarly, increase in weight of the animal by one kg results increase in sale price by 1.52 times. Gender of the animal also played important role in obtaining higher price. The odds ratio of gender revealed that, the male animal fetches 1.78 times higher price than the female animal. The festival has also influence on higher price of sheep and goat to the extent of 1.54 times than the normal season. The other factors namely, age (0.6313), colour (0.004), existence of large number of buyers in the market (0.9989) and season (0.188) have not shown influence on sale price of sheep and goat. The prices of sheep and goat plays very important role to take up sheep and goat rearing activities by the farmers. However, the buyers are going to examine important factors viz., body biomass weight, age, colour and breed for fixing the price for the animal. Similar findings were reported by Dixit et al (2014). IV. Conclusion The per animal marketing cost incurred by sheep and goat farmers was The cost on transportation (35.85%) and feed (26.35%) were the most significant constituent of the total marketing costs. The farmers realized less than 82 per cent of the price paid by the butcher and wholesaler. However, the magnitude of price spread in channel-iv (17.18%), channel-ii (18.45%) and channel-i (18.45%) were found to be higher than that of channel-iii (8.40%). The physical characteristics namely, body weight, breed, sex were influenced significantly on sale price of goat and sheep. References [1] Anonymous, 2012, Livestock census report, Government of India. [2] Anonymous, 2014, Karnataka at a glance, Directorate of Economics and Statistics, Government of Karnataka, Bengaluru. [3] Arun Pandit and Dhaka, J. P., 2005, Efficiency of male goat markets in the central alluvial plains of West Bengal, Agricultural Economics Research Review, Vol. 18, pp: [4] Dixit, A.K., Singh, M.K. and Rai, 2014, Goat production and marketing in India: opportunities and challenges, Indian Society for Sheep and Goat Production and Utilization, conference issue: [5] Dixit, A. K. and Singh, M. K., 2014, economic analysis of goat rearing under field conditions of Bundelkhand region, The Indian Journal of Small Ruminants., 20(2): [6] Ramesh, D., Meena, H. R. and Meena, K. L., 2012, Analysis of small ruminant market system in different agro-climatic zones of Southern India, Vet. World, Vol.5 (5): [7] Solomon, G. G., 2006, Genetic diversity and conservation priorities for Ethiopian sheep, Proceedings of a workshop on Sheep Breeding Strategies for Ethiopia held at ILRI, Addis Ababa Ethiopia on 21 November ILRI (International Livestock Research Institute), Nairobi, Kenya. DOI: / Page