The role of livestock in the generation of smallholder farm income in two Vertisol areas of the central Ethiopian highlands

G. Gryseels

Highlands Programme International Livestock Centre for Africa (ILCA)
PO Box 5689, Addis Ababa, Ethiopia

Present address: TAC Secretariat, FAO, Rome, Italy

Abstract
Introduction
Materials and methods
Contribution of livestock to farm income
Conclusions
References

Abstract

The paper examines the contribution of livestock to farm income in two Vertisol areas of the Ethiopian highlands: around Debre Zeit (1850 m altitude) and around Debre Birhan (2800 m altitude). The data used in the analysis were obtained in a farm management survey of randomly selected smallholder farms in each area. Trade in livestock and livestock products contributes a significant proportion of farm cash income, ranging from 85% in the high-altitude zone to 35% in the medium-altitude zone. Livestock also provide approximately 50% of the farm gross margin, which increases to 60% if the value of draught power is also taken into account.

In the subsistence farming system of the Ethiopian highlands, principal functions of livestock are security and investment: animals are purchased as a store of wealth and are sold according to cash flow needs. Despite the low productivity of livestock in this traditional farming system, this investment is sound: the annual rate of return on investment is estimated at 25% for sheep and 31% for cattle.

The principal contribution of cattle to the farming system is the provision of draught power for crop production. Although the two study areas contrast in terms of ecology and the availability of draught animals, there appears to be a direct correlation between ox ownership and farm cereal production, reflected in area cultivated, cropping pattern and, at least for the Debre Birhan area, yield per unit area.

Introduction

Almost all farmers in the central Ethiopian highlands own livestock. A typical herd contains cattle, sheep, equines, and poultry. In terms of monetary value or contribution to agricultural production, Zebu cattle are the most important species: their prime role is to supply draught power for crop cultivation, and manure, most of which is dried and used as household fuel. Small ruminants are often numerically the most important species: sheep and goats are kept mainly as an investment and a source of cash in times of need, but they also supply the dominant type of meat consumed in rural areas, as well as manure for fuel. Donkeys are mostly used as pack animals while horses are used for human transport. Poultry are scavengers and kept for egg production and human consumption.

Human diets in the Ethiopian highlands consist mainly of cereals and pulses, and the consumption of meat is largely confined to feast-days. Yet, livestock are of crucial importance to the farm economy.

This paper investigates the role of livestock in the generation of farm income in two Vertisol areas of the central Ethiopian highlands, and shows that livestock provide an important, even predominant, part of farm income.

Materials and methods

The data used in this analysis were collected in farm management surveys undertaken by ILCA in the two main study areas of its Highlands Programme (Gryseels and Anderson, 1983a): around Debre Zeit, 50 km south of Addis Ababa at an altitude of 1850 m, and around Debre Birhan, 120 km northeast of Addis Ababa at an altitude of 2800 m.

The Debre Zeit data were collected between 1979 and 1980 for a total of 80 farmer-years from farmers who were members of three different Peasants' Association (PA). The survey covered approximately 40 farmers each year, or about 10% of the local farmer population. The Debre Birhan data were collected between 1979 and 1983 for a total of 200 farmer-years from farmers who belonged to four PAs. The survey also covered approximately 40 farmers each year, in this case about 5% of the farmer population of each PA concerned.

The farmers surveyed were randomly selected from PA population lists supplied by the local district office of the Ministry of Agriculture. The data were collected by experienced enumerators, all high school graduates, through direct measurement, observation and weekly formal interviews. The data were analysed using SPSS routines.

A general description of the study areas is given in Gryseels and Anderson (1983b). The soils in both areas are predominantly Vertisols. Although both areas have a similar farming system, they form a marked contrast. The area around Debre Zeit is representative of Ethiopia's large middle-altitude cropping zone. It is more productive and intensively cultivated than the area around Debre Birhan, with virtually no arable land kept fallow. The average farm size is around 2 ha. Teff is the principal cereal grown, the other important crops being wheat, maize, sorghum, faba beans, chickpea and field peas. The average livestock holding consists of 4.24 cattle, 2.55 small ruminants and 1.03 equines, or the equivalent 4.27 TLU (Tropical Livestock Unit, defined as an animal of 250 kg liveweight) (Table 1). Only 21% of farmers own fewer than two oxen.

Debre Birhan is representative of the higher-altitude zone of the country. Frost, hail, a short growing season and low soil fertility, severly limit agricultural production. Average farm size is around 3.3 ha, of which 2.3 ha are cultivated and l ha is kept fallow. The main crops are barley, wheat, oats, faba beans, field peas, lentils and linseed. Mean livestock holdings are larger than elsewhere in the Ethiopian highlands, averaging 6.18 cattle, 11.16 small ruminants and 2.83 equines, or the equivalent of 7.66 TLU (Table 1). About 50% of farmers have only one ox or none at all.

Contribution of livestock to farm income

Cash income

Farmers in the central Ethiopian highlands are subsistence oriented and only a small proportion of farm grain production is sold. In the study areas, the mean proportion marketed was 20% at Debre Zeit and 4% at Debre Birhan. The proportion of livestock products sold, rather than consumed at home, is relatively higher, averaging between 30 and 50%, in value terms, in both areas.

Total annual cash income per farm averaged 379 Birr at Debre Zeit and 415 Birr at Debre Birhan (Table 2). Significant proportions of farm cash incomes orginate from trade in animals and the sale of livestock products-an average of 34% at Debre Zeit and 87% at Debre Birhan. At Debre Birhan, the trade in livestock was particularly important, accounting for 56% of farm cash income against 31% from the sale of livestock products. In this high-altitude area 46% of cash income from animal trade originated from the sale of cattle, 40% from sheep, 13% from equines and 1% from poultry. Animals are purchased and sold according to cash flow needs. Farm cash incomes should therefore not necessarily be considered as a proxy for wealth accumulation. As crop yields fail, farmers are forced to sell animals to purchase food grain. Cash incomes may therefore increase from one year to the next, even though there is a decline in overall farm earnings. In view of the importance of livestock as a source of security and investment, there is some evidence that farmers with larger livestock holdings derive a relatively smaller proportion of their cash income from livestock production.

Table 1. Mean livestock holdings per farm at Debre Zeit and Debre Birhan.

Livestock type	Debre Zeit	Debre Birhan
Oxen	1.86	1.23
Cows	0.93	1.50
Heifers	0.33	1.74
Bulls	0.48	0.60
Calves	0.64	1.11
Total cattle	4.24	6.18
Sheep	1.55	10.99
Goats	1.00	0.17
Total small ruminants	2.55	11.16
Donkeys	0.98	1.70
Horses/mules	0.05	1.13
Total equines	1.03	2.83
Total TLUa	4.27	7.66
Monetary value
(Ethiopian Birr/farm)b	1185	1614

^a. TLU: Tropical Livestock Unit is defined as an animal of 250 kg liveweight.
^b. US$1 = 2.07 Ethiopian Birr.

Table 2. Mean cash income from farm sales at Debre Zeit and Debre Birhan (Ethiopian Birr/farm)^a.

Source	Debre Zeit (average 1979-80)	Debre Birhan (average 1979-83)
Crop and crop by-products	247	53
Livestock and livestock productsb	129	362
Total	379	415
% of cash income from livestock	34	87

^a. US$1 - 2.07 Ethiopian Birr.
^b. Net sales of livestock calculated as the difference between animals sold and purchased.

At Debre Birhan, manure alone accounted for 25% of the sale of livestock products, and dairy products just over 50%.

Farm gross margin

The overall gross margin per farm per year averaged 948 Birr at Debre Zeit and 1403 Birr at Debre Birhan. Approximately half of this gross margin (45% at Debre Zeit and 53% at Debre Birhan) could be attributed to the value of livestock production (Table 3). When the value of intermediate products was included (return from draught power and opportunity cost of farm produced straw and hay), the fraction of the gross margin provided by livestock production increased to 59% at Debre Zeit and 60% at Debre Birhan.

The gross value of production (GYP) per farm per year averaged 1773 Birr at Debre Zeit and 2570 Birr at Debre Birhan, of which 43% and 46%, respectively, were contributed by livestock production.

The subsistence nature of these traditional farming systems is highlighted by relating the annual farm cash income to the gross value of production. At Debre Zeit, cash income accounted for 21% of GVP; at Debre Birhan the figure was 16%.

Table 3. Mean gross margins and gross value of production per farm at Debre Zeit and Debre Birhan (Birr/farm)^a.

		Debre Zeit (average 1979-80)	Debre Birhan (average 1979-83)
Gross marginb
	from crops	522	659
	from livestock production	426	744
	Total	948	1403
	% from livestock	45	53
Gross margin including intermediate productsc
	from crops	522	659
	from livestock production	747	983
	Total	1269	1642
	% from livestock	59	60
Gross value of productiond
	from crops	1005	1385
	from livestock production	768	1185
	Total	1773	2570
	% from livestock	43	46

a. US$1 = 2.07 Ethiopian Birr.

b. Gross margin of crops is calculated as: (crop yield x output price) - (seed use x seed price) - (fertilizer use x fertilizer price) - (cost of hired labour + cost of hired traction) + (yield of cereal straw x price).

Gross margin of livestock is calculated as the difference between returns (including value of progeny, milk, meat, manure, hide/skin and wool) and costs (veterinary expenses, hired labour, purchased feed) per unit of livestock.

c. Intermediate products refers to the value of draught power (returns) and the market value of farm produced straw and hay (costs). Draught power value per ox is estimated at the equivalent of 0.6 ha of crops or 180 Birr per annum. Young bulls are valued at 51% of this value. Donkey transport is estimated at 60 t km^-1 year^-1 and valued at 0.50 Birr each Straw and hay are valued at market prices.

d. Gross value of production is calculated as the total market value of crop and livestock products produced on the farm. It does not take into account the value of intermediate products.

Draught power and grain production

Gryseels et al (1986) have investigated the impact of draught power availability on crop production in both the Debre Zeit and Debre Birhan areas. It was found that on smallholder farms in both study sites, the number of oxen owned had a significant effect on area cultivated, and there was a positive relationship between ox-holding and farm grain production. At Debre Zeit, farmers with two or more oxen cultivated 59% more land than those with fewer oxen, but there was no effect on yield per ha. At Debre Birhan, farmers owning two or more oxen cultivated 32% more land than those owning none, while their net cereal yields per ha were 48% higher.

When the effects of draught power on yield per ha and on area cultivated were combined, Debre Zeit farmers owning two or more oxen produced 82% more cereals than farmers with one or no oxen. The effect of draught power on grain production at Debre Birhan was also substantial, farmers with two oxen producing on average 63% more grain than farmers with no oxen, and 19% more than farmers with one ox (Table 4). Overall, farmers with one ox had an estimated total net farm cereal production 267 kg higher than farmers with no oxen, while the margin due to second ox was a further 186 kg.

There also appeared to be an effect of ox holding on farm cropping patterns. Cereals require higher draught power inputs for land preparation than pulses. Farmers with no oxen sowed a greater proportion of their arable land to pulses, which have lower gross margins than cereals. These differences in cropping patterns may therefore have led to income differences across ox-ownership classes.

Livestock for security and investment

A principal function of livestock is its use for security and investment. It is the second most important function of cattle, but the major objective for farmers with sheep enterprises. Farmers consider livestock to be a more reliable store of wealth than other alternatives, such as bank deposits, as well as an investment which is easy to convert into cash. Despite the low productivity of livestock in this traditional system, this investment is a sound one. The annual rate of return on investment in livestock of local breeds can be estimated at-25% for sheep and 31% for cattle. This figure was calculated using a methodology first developed by Upton (1985).

Table 4. Impact of ox holding on net farm cereal production (kg/farm)^a.

No of oxen owned	Debre Zeit (average 1979-80)	Debre Birhan (average 1979-83)
None	722	877b
One	989
Two or more	1175	1597

a. Statistical estimates from least square analysis.
b. Data limitations meant farms with one or no ox had to be treated as a single group in the analysis.

Source: Gryseels et al (1986).

The method is simplified as it takes only the major livestock products (meat from sheep, and milk and meat from cattle) into account. The model could, however, easily be expanded to take into account other livestock commodities. The sheep model (Table 5) follows the Upton method. The cattle model (Table 6) was modified to enable the incorporation of milk into the model. The assumptions made for the calculation of the annual rate of return are based on the technical parameters collected in livestock productivity surveys in both study areas. As there was no evidence of a significant difference in the productivity of livestock enterprises of local breeds between the study areas, the results are valid for both Debre Zeit and Debre Birhan.

The rate of return on investment in livestock can be considered as being attractive, and farmers will therefore invest their surplus cash in the purchase of animals. This occurs particularly after good harvests when a substantial part of the crop can be marketed. Oxen are purchased when they are required for farm production, just before and during the ploughing season.

Table 5. Annual rate of return from sheep enterprise^a.

A. Average litter size	1.00
B. Parturition interval	300 days
C. Annual reproductive rate (1.00 x 365/B)	1.22
D. Survival rate to three months	0.72
E. Survival rate from three to twelve months	0.90
F. Survival rate zero to twelve months (D x E)	0.65
G. Effective lambing rate (C x F)	0.79
El. Liveweight at twelve months	15 kg
I. Liveweight production per ewe (G x H)	11.85 kg
J. Number of ewes per ram	16
K. Mortality of breeding stock	0.18
L. Mean price per kg liveweight	1.2 Birr
M. Price per adult ewe	30 Birr
N. Price per adult ram	40 Birr
P. Gross output per ewe (I x L)	14.11 Birr
Q. Ewe depreciation (K x M)	5.40 Birr
R. Ram depreciation (K x N)	7.20 Birr
S. Breeding stock depreciation (Q + R/J)	5.85 Birr
T. Net output per ewe per year (P - S)	8.26 Birr
U. Capital investment per ewe (M + N/J)	32.30 Birr
V. Annual rate of return (T/U x 100)	25.41%

a. US$1 = 2.07 Ethiopian Birr.

Animals are sold according to cash flow needs, and the opportunity of making profits. Farmers will raise the cash needed for major household or farm expenditure (the purchase of food grain after poor harvests, of household items or of farm inputs such as seeds, or to pay for social obligations such as wedding parties) by selling, sheep or young cattle. The sale of livestock is a selective process. Smallstock (lambs, sheep and goats) are sold first, then young cattle and equines, then cows, and in a final and desperate stage, oxen. This need for cash is Most sales take place from April to June.

Conclusions

Livestock make a substantial contribution to the economy of smallholder farmers in the central Ethiopian highlands.

Trade in livestock and the sale of livestock products contribute 34% of total farm cash in the medium-altitude zone and 87% in the high-altitude zone. Livestock also provide approximately 50% of the farm gross margin (60% when the value of intermediate products such as draught power is taken into account). Farmers receive attractive rates of return from investment in livestock, and livestock are important as a cash reserve in ensuring survival during bad agricultural years.

A positive correlation exists on smallholder farms between the ownership of draught animals and grain production.

The modest cash component within the farming system highlights the very limited opportunity for internal financing of improvements. Agricultural inputs compete for this cash with household needs. It is important that this limitation is given consideration in the design of new technology.

Table 6. Annual rate of return from cattle enterprise^a.

A. Calving interval	690 days
B. Annual reproductive rate (365/A)	0.53
C. Survival rate to twelve months	0.78
D. Effective calving rate (B x C)	0.41
E. Liveweight at twelve months	75 kg
F. Liveweight production per cow (D x E)	31 kg
G. Number of cows per bull	3
H. Mortality of breeding stock	0.10
I. Mean price per kg liveweight	1.50 Birr
J., Price per cow	180 Birr
K. Price per bull	250 Birr
L. Gross meat output per cow (F x I)	47 Birr
M. Gross milk production per cow	292 litre
N. Annual milk production (M x D)	120 litre
O. Milk price per litre	0.50 Birr
P. Gross value milk output (N x O)	60 Birr
Q. Total gross output per cow (P + L)	107 Birr
R. Cow depreciation (H x J)	18 Birr
S. Bull depreciation (H x K)	25 Birr
T. Breeding stock depreciation (R x S/G)	26 Birr
U. Net output per cow per year (Q - T)	81 Birr
V. Capital investment per cow (J + K/G)	263 Birr
W. Annual rate of return (U/V x 100)	31%

a. US$1 = 2.07 Ethiopian Birr.

References

Gryseels G and Anderson F M. 1983a. Farming systems research in ILCA's Highland Programme. Farming Systems Support Project Newsletter 1(3):7-10. University of Florida, USA.

Gryseels G and Anderson F M. 1983b. Research on farm and livestock productivity in the Ethiopian highlands. Initial results 1977-1980. ILCA Research Report No. 4. ILCA (International Livestock Centre for Africa), Addis Ababa. 52 pp.

Gryseels G. Anderson F M, Durkin J and Getachew Asamenew. 1986. Draught power and smallholder grain production in the Ethiopian highlands. ILCA Newsletter 5(4):5-7.

Upton M. 1985. Models of improved production systems for small ruminants. In: J E Sumberg and K Cassaday (eds), Sheep and goats in humid West Africa. Proceedings of the Workshop on Small Ruminant Production Systems in the Humid Zone of West Africa, Ibadan, Nigeria, 23-26 January 1984. International Livestock Centre for Africa, Addis Ababa, Ethiopia. pp. 55-67.