SUDAN MULTI DONOR TRUST FUNDS
MDTF-National
Sector Policy Note
Livestock Marketing in Eastern and Central Sudan
Babiker Idris
Multi Donor Trust Fund-National
Technical Secretariat
The World Bank
Khartoum
ABBREVIATIONS AND ACRONYMS
AOAD
ARSC
CPA
FAO
FNC
FOB (also f.o.b.)
DTIS
GAC
GDP
GNU
GOS
HPS
IFAD
JAM
JECFA
MDTF
MDTF–N
MDTF–S
MFNE
MFT
MT
OC
RVT
SC
SDD
SDG
SPLM
SR
SSA
TLU
TS
WB
WHO
Arab Organisation for Agricultural Development
Animal Resources Service Company
Comprehensive Peace Agreement
Food and Agricultural Organization
Forest National Corporation
Free on Board
Diagnostic Trade Integration Study
Gum Arabic Corporation
Gross Domestic Product
Sudan Government of National Unity
Government of Sudan
Hand Picked Selected
International Fund for Agricultural Development
Joint Assessment Mission
Joint Expert Committee on Food Additives
Multi-Donor Trust Fund
Multi-Donor Trust Fund - National
Multi-Donor Trust Fund - South
Ministry of Finance and National Economy (GNU)
Ministry of Foreign Trade (GNU)
Metric Ton
Oversight Committee
Rift Valley Fever
Sudan Consortium
Sudanese Dinars
Sudanese Pounds
Sudanese People Liberation Movement
Saudi Riyal
Sub-Saharan Africa
Tropical Livestock Unit
Technical Secretariat
World Bank
World Health Organization
i
TABLE OF CONTENTS
ABBREVIATIONS AND ACRONYMS ........................................................................................ i
PREFACE ...................................................................................................................................... iv
ACKNOWLEDGEMENT ...............................................................................................................v
Domestic Supply and Demand................................................................................................2
Export Supply and Demand ....................................................................................................2
Export Supply and Demand ....................................................................................................3
Export Markets for Sheep and Goats ......................................................................................3
The Saudi Live Sheep and Goat Market .................................................................................4
Domestic Livestock Marketing...............................................................................................5
Market Access and Transportation Costs .............................................................................10
The Division of Labour within the Market Channels ...........................................................11
Market Flows ........................................................................................................................11
Livestock Flows in Gedarif Market ......................................................................................11
Marketing Costs and Margins...............................................................................................12
Internal Trade Financing.......................................................................................................14
Transportation .......................................................................................................................16
Veterinary Services...............................................................................................................18
III. CONCLUTIONS ....................................................................................................................20
IV. RECOMENDATIONS ...........................................................................................................22
REFERENCES ..............................................................................................................................24
List of Tables
Table 1: Sudan - Live Sheep Exports by Market............................................................................ 4
Table 2: Sudan - Mutton and Lamb Exports by Market, 2002-2005.............................................. 4
Table 3: Sudan - Marketing Margins between Producers and Butchers....................................... 12
Table 4: Sudan - Summary of Sheep Marketing Costs................................................................. 15
Table 5: Sudan - Cost Comparison between Trucking and Trekking of Sheep from ElObeid to
Omdurman….………………………………………………………………….16
Table 6: Price Correlations between Markets............................................................................... 17
Table 7: Johansson's Lamda - Max Test for Cointegration among Sheep Markets ..................... 18
ii
Annexed Tables
Table A. 1: Animal Resources Share in GDP, 2000-2004 ........................................................... 28
Table A.2: Livestock Consumption Estimates, 2000-2004 .......................................................... 28
Table A.3: Livestock Off-Take Estimates, 2000-2004................................................................. 29
Table A.4: Live Sheep and Goat Imports to the Middle East....................................................... 29
Table A.5: Sheep and Goat Meat Imports to the Middle East ...................................................... 30
Table A.6: Imports of Live Sheep to Saudi Arabia by Country ................................................... 31
Table A.7: Imports of Sheep Meat to Saudi Arabia by Country, 2000-2003, .............................. 32
List of Figures
Figure 1: Sheep Sales – Omdurman Terminal Market, 1995-2004 ................................................ 2
Figure 2: Livestock Marketing Channels........................................................................................ 7
Figure 3: Terms of Trade between Sorghum and Sheep, Gedarif Market, 2002-2005 ................ 14
Annexes
Annex I: Commissioner General Order & Translation…………………………………………..25
Annex II: Livestock Statistics …………………………………………………………………...27
iii
PREFACE
More than 80 % of the total population is dependent on rain-fed agriculture and related
activities. Majority of the farmers are subsistence farmers and animal husbandry is a significant
diversification strategy to mitigate crop failure and an income strategy to meet the household’s
needs beyond cereals. Livestock is the second most important foreign exchange earner after
petroleum products in addition to providing manure for soil fertility, and power for tillage,
cultivation, and transport. Given its relative importance to the economy of Sudan, this policy
note is intended to identify the key factors constraining livestock marketing.
The policy note focused on the role of the public sector to improve livestock marketing.
The note’s three main recommendations are; (a) provision of matching grants to livestock
exporters for promotion of Sudanese products, for capacity building among exporters and trader
organizations and for introducing meat cuts and packaging technology to enable exporters to
penetrate this section of the market; (b) public sector to invest in road infrastructure for
facilitating and reducing costs of transport of live animals, and (c) on taxation: (i) eliminate
internal taxation by localities being careful to distinguish between quarantine and market
operation fees and taxes, (ii) eliminate the localities’ share of the market fees, (iii) enforcement
of the Council of Minister’s Decree of May 2006 which abolished all tax collection points on
highways and amendment of the decree to include tax collection points along livestock routes;
and (iv) transfer sufficient income from the central Government to the states and localities to
compensate them for their respective losses of livestock tax income including the localities’
share of the market operation fees.
The recently approved MDTF-N – Improving Livestock Production and Marketing
Project- A Pilot, has taken into account the first recommendation and will build the capacity of
exporters and traders through improved market infrastructure and information dissemination to
both producers and traders. On the second recommendation, there are already on-going efforts by
the GoNU to improve road infrastructure in the country.
There are a number of issues on livestock marketing that would benefit from further
investigation. These include a review of the experience in the implementation of the various
decrees which have been issued with respect to eliminating taxation at the local and state level
and a rigorous value chain analyses for livestock products.
The importance of livestock sector to the subsistence farmers and to the economy of Sudan
cannot be underestimated and efforts should be made to ensure continuation and improved
efficacy of marketing livestock products.
Elsheikh M. Elmak
Chair of MDTF-N Oversight Committee
Corina van der Laan
Co-chair of MDTF-N Oversight Committee
iv
ACKNOWLEDGEMENT
This policy note is a product of the Multi-Donor Trust Fund - National. This is one of the
two trust funds established under the authority of the Comprehensive Peace Agreement (CPA)
which was signed in January 2005. The trust funds which assist the Government of National
Unity and the Government of Southern Sudan are both administered by the World Bank.
One of the key design features of the Multi-Donor Trust Funds (MDTFs) is that
investment programs and projects would be grounded in the analysis of the Joint Assessment
Mission (JAM) which was published in March, 2005. The JAM, started well ahead of the signing
of the CPA, was managed jointly by the United Nations and the World Bank with the full
endorsement, guidance and participation of the Government of Sudan (GOS) and the Sudan
People’s Liberation Movement (SPLM). The report of the JAM was a Framework for Sustained
Peace, Development and Poverty Reduction which was endorsed by both the GOS and the
SPLM. A core element of the JAM report was a Monitoring Framework which included a
reference to the livestock sector, namely that the export policies.
This policy note was prepared by Babiker Idris (National Consultant). It was reviewed by
a number of World Bank staff, namely Jack van Holst Pellekaan (consultant, World Bank),
Thomas Yves Couteaudier (consultant, World Bank).The policy note was prepared under the
overall supervision of Jeeva Perumalpillai-Essex, Lead Operations Officer in the World Bank,
with support from Asif Faiz, Country Manager for the World Bank in Sudan and Manager of the
Technical Secretariat for the MDTF-National. Mohamed O. Hussein was responsible for the
production of the report while Azza Imam processed the report.
Considerable assistance was received from a range of Government and non-Government
experts in livestock marketing. The policy note benefited substantially from a series of
discussions with Mr. El Simeih El Siddig, State Minister of Investment; Prof. El Amin Dafalla,
Chairman of the Agricultural Committee of the National Assembly; Mr. Omer Abdel Salam,
Director General of International Co-operation, Ministry of Finance; the Chamber of Commerce
Secretary General and the group of selected Live Animals and Meat Exporters; Dr. Ahmed
Almustafa Hassan, Undersecretary, Ministry of Animal Resources and Fisheries; Dr. Isam
Siddig, Manager, Animal Resources Services Company; Dr. M. Abdel Gadir, IFAD Country
Officer in Khartoum; Dr. M. A. Dingil, Advisor to the Sudanese Authority for joining WTO; Mr.
Omer Akaraib, Manager, IFAD Rural Development Project, EL Obeid; Mr. Ahmed Hanafi,
IFAD Western Sudan Program Coordinator, El Obeid; Dr. Imadadin El Hag, Manager, Animal
Resources Services Company, Kosti; and the traders, exporters, and producers in Kosti, El Obeid
and Omdurman livestock markets.
v
I. INTRODUCTION
1.1
Sudan is an overwhelmingly agricultural country. Much of the farming is of a
subsistence kind; agriculture occupies some 80% of the workforce but contributes only 35%
of the GDP. Agricultural production varies from year to year because of intermittent
droughts that cause widespread famine. The government plays a major role in planning the
economy. The leading export crops are cotton, sesame, peanuts, and sugar. Other agricultural
products include sorghum, millet, wheat, cassava, tropical fruits, and sweet potatoes. Sheep,
cattle, goats, and camels are raised. A variety of forest products are produced, by far the most
important being Gum Arabic, with Sudan accounting for much of the total world production.
In the south, fish caught in the Nile system are an important dietary staple.
1.2
The livestock marketing policy note includes:ƒ
Description of current market structure and marketing arrangements, including
value chains for sheep and cattle from major production areas to Khartoum and
export markets;
ƒ
Identification of constraints to the existing marketing system, market
management, taxation, transport costs, export arrangement, animal health, and
product standards.
ƒ
Identification of the demand side and discuss options for improved Livestock
marketing.
1.3
The livestock marketing policy note has taken into account the results of Diagnostic
Trade Integration Study (DTIS), led by the World Bank, which analyzes both the internal and
external constraints facing Sudan in increasing its integration into the global economy. DTIS
assesses Sudan’s livestock export competitiveness.
II. LIVESTOCK MARKETING
2.1
In Sudan, agriculture accounts for more than 80 % of non-oil revenue and a
significant part of non-oil exports. More than 80 % of the total rural population depends on
rain-fed traditional farming for its livelihood in Western, Central and Eastern Sudan while
two-third of the population in Northern Sudan is rural. Development of agriculture,
particularly rain-fed, is therefore Sudan’s main prospect for equitable economic growth.
2.2
Rain-fed farming is characterized by subsistence production, employment of family
labour, and few modern inputs such as fertilizers or improved seeds. Rain-fed farmers give
priority to cereals, specifically to sorghum or millet for securing household food supply.
Livestock and Gum Arabic are both a diversification strategy to mitigate crop failure and an
income strategy to meet the household’s needs beyond cereals. Livestock products are the
second foreign exchange earner after petroleum products; in addition livestock provides
manure for soil fertility, and power for tillage, cultivation, and transport.
1
2.3 Currently, livestock contributes about 20 % of GDP as shown in Table A.1 and finding
a way of making it profitable would have a major role in alleviating rural poverty. However,
livestock production and exports are sometimes thought to be adversely hampered by internal
marketing costs, high taxation, the recent appreciation of the Sudanese currency against the
US dollar, and export competition in the Gulf markets.
Domestic Supply and Demand
2.4
Demand and supply for meat are shown in Table A. 2. From 2000-2004, total meat
production grew substantially, per capita meat consumption rose by about 20% and livestock
exports grew by about 33%. Though there has been no animal census since 1976, rough
estimates about the national herd are approximately 50 million Tropical Livestock Units
(TLU). This is roughly 1.4 per capita, which is one of the highest in Sub-Saharan Africa
(SSA); Cattle are about 30% of the total number of TLU. Annual off-take rates for cattle
vary between 10 and 20% and from 30 to 50% for sheep and goats Table A.3. Beef
consumption was 69 % of total consumption, mutton about 18%, goat about 10% and camel
about 3% Table A.2.
2.5
The upward trend in domestic demand is also illustrated by the annual sales of
animals and the trend in prices. The average number of sheep transacted in Omdurman
terminal market is shown in (Figure 1).
Figure 1: Sheep Sales – Omdurman Terminal Market, 1995-2004
(in ‘000 of animals sold)
500
450
350
300
250
200
150
100
50
Year
2
2004
2003
2002
2001
2000
1999
1998
1997
1996
0
1995
No. of sheep sold (in '000)
400
Export Supply and Demand
2.6
Sheep exports, mainly to Saudi Arabia and the Gulf, constitute about 80% of
livestock export followed by goats 10.5%, camels (exported mainly to Egypt) 9% and some
cattle.
2.7
The total quantity of meat exported during 2002-2005 Table 1, was about 20,350
tons, with an annual average of about seven thousand tons. Exports are mainly mutton,
whose annual exports range between 84% and 95% of the total quantity of meat exported
annually.
2.8
Two important states forming part of greater Butana, Gedarif and Kassala, contribute
significant number to livestock export. For example, in 2005, the two states contributed
10%, 23.5% and 40% to the total export of sheep, goats and camels respectively. Nearly all
camels and goats exported to Saudi Arabia and the Gulf States came from these two states.
Moreover, they also have a significant share of the camels exported to Egypt, transported by
hoof.
2.9
Camels are traded mainly by their owners in the markets of El Damer Rattage,
Kassala, Gedarif and Showak. There are quarantine facilities at Showak and at Kassala. The
quarantine facility in Showak was established in 1997 but started operation in 2005. It was
established for sheep destined for Saudi Arabia during Haj. Its capacity is 20,000 head of
sheep and 3,000 of camels. For vaccination and supervision purpose export animals are kept
in the quarantine facility for 3 weeks. The final health certificate is issued in Port Sudan.
The facility at Kassala follows more or less the same procedure.
Export Markets for Sheep and Goats
2.10 Annual average of imported live sheep and goats for Middle East countries is US$
634 million for the period of 1997-2001 (Table A. 4 & A. 5). Sheep and goat meat import
values are relatively stable ranging between US$233 and US$224 million from 1996 through
2003. Sudan’s chief Middle Eastern markets are the Gulf countries and Egypt. Although the
Gulf nations have small populations, they have high incomes, plus high population and
income growth rates. The expected annual population growth rate for 2001-2015 ranges
between 1.8% for UAE and 2.9 % for Saudi Arabia.
2.11 Tables (1) and Table (2) respectively show mutton and lamb meat and live sheep
exported from Sudan to Middle East Countries. The data show that Sudan with 76% market
share has a competitive advantage in the whole carcass sheep market in Saudi Arabia, while
Pakistan has 63% market share of the whole carcass lamb market Table A.7. Australia and
New Zealand, on the other hand, monopolize the market for fresh meat cuts, with 68% and
32% market shares respectively. Sudan price of US$3043/ton is lower than the US$4100/ton
and US$4429/ton for Australia and New Zealand respectively though Pakistan’s low price, at
US$1908/ton, generates a smaller market share probably due to poorer quality Table A. 7. In
comparing Sudanese fresh young sheep exports with other meat exports to Saudi Arabia,
differences in product characteristics, notably shelf life, must be considered. Sudanese
chilled meat expires after two weeks while that of Australia and New Zealand lasts three
months. This is due to differences in packaging materials and technology, as the Australian
and New Zealand producers use vacuum packing for the whole carcass with carbon dioxide
fumigation while the Sudanese producers use cotton wrapping as packaging.
3
Table 1: Sudan - Live Sheep Exports by Market
(‘000 of animals)
2000
2001*
2002
2003
2004
2005
Egypt
1.4
11.5
0.1
0
0
0
Kuwait
0
0
0
0
0
2.0
Libya
0
4.0
1.9
0
0
0
Qatar
0
0
0
0
0.9
0.002
727.6
0
1600.6
1310.0
1701.0
1268.0
2.2
0
0.006
5.4
2.0
1.8
731.2
15.5
1602.6
1315.4
1704.0
1271.8
Market
Saudi Arabia*
U.A.E.
Total
* Export ban to Saudi Arabia in 2001.- Source: Ministry of Animal Resources & Fisheries export data 2006.
Table 2: Sudan - Mutton and Lamb Exports by Market, 2002-2005
(metric tons)
Market
2002
2003
2004
2005
Abu Dhabi
0
3.3
0
0
Bahrain
0
4.3
7.1
1
Egypt
0
3
0
0.1
Jordan
1115.3
1442.7
233.5
Kuwait
0
0.3
0
0.3
Libya
0
3
88.1
0
Qatar
243.4
345.8
302.2
207.5
Saudi Arabia
7154.9
7837.5
4911.3
4347
Sultanate of Oman
5.9
1.8
0
14.7
U.A.E.
100.3
58.7
22.8
11.7
Share of Saudi Arabia in Total
83
80.8
88.2
92.3
Total
8619.8
9700.4
5565
4710
Source: Calculated from Ministry of Animal Resources & Fisheries export data, 2006.
Note: No recorded sheep exports from Somalia to Saudi Arabia since 2001.
The Saudi Live Sheep and Goat Market
2.12 Saudi Arabia is the largest Gulf market due to population size, high rates of
population growth and of per capita income growth. It is now the main market for Sudanese
sheep and goats has a strong potential market for expanded products of live small animals
and meat. The main competitor countries in the Saudi live sheep market are Syria, Sudan and
Australia with more than 92% of the market Table A.6. Sudan's market share grew from
27.4% in 2002 to 31.4% in 2003, which is a return to trend after the ban of its export in 2001
on account of Rift Valley Fever (RVF). Syria's market share declined from 32.8% in 2002 to
25.5% in 2003 possibly because of the relatively high price of its sheep. Australia benefited
4
greatly from the outbreak of RVF in 2001 in Sudan when its market share jumped from
10.55% in 2000 to 63.7% in 2001. After the RVF crisis, Australia held its market share
above 35%. Its main advantage is price with average of 4.93 thousand SR per ton for 2003
compared to 11.42 thousand SR per ton and 6.05 thousand SR per ton for Syria and Sudan
respectively.
2.13 Syria is the main supplier of live goats to the market with a 76% market share in
2003. Sudan's market share is only 12%, despite the fact that the average price per ton of
Sudanese goats was 4,000 SR and the average price for Syrian goats was 11,500 SR per ton
for the same year.
2.14 In the carcass sheep market the main competitors are Sudan with 65% of the market
in 2003, Pakistan with 9% and New Zealand with 10%. The problem, however, is the
composition of sheep and meat imports to Saudi Arabia. For 2003 the carcass lamb fresh
meat constituted only 6% of all sheep meat, the carcass sheep fresh meat, in which Sudan is
the strongest competitor with 65% market share, constituted 15%, while the other meat cuts,
fresh or frozen, constituted 79% of all sheep meat imports in 2003. Australia dominates the
meat cuts market, with 62% market share, and New Zealand with 38% market share.
Domestic Livestock Marketing
2.15 Livestock are most prevalent in the rain-fed farming areas of Western, Central and
Eastern Sudan where they are raised under nomadic and transhumance systems (moving with
livestock and growing short-maturity subsistence crops). Ruminant feed consists of pastures,
browse, crop residues, and supplements of cereals and oilseeds.
2.16 The structure of livestock marketing is primary market at the village level, secondary
market at the regional level, and one terminal market (Khartoum Omdurman) for final
domestic sales or exports (as described in Hussein, 2007). Associated to the animal trade is a
vigorous commerce in animal products, water and fodder along the marketing chain and
around terminal markets.
2.17 Apart from the Omdurman market and a few secondary markets run by the Animal
Resources Service Company (ARSC), management of formal livestock market is the
responsibility of states and localities. Off take percentages are low due to the absence of
incentives for herders to sell their animals; animals are not paid on a live weight basis and
there is no grading system in place. Traders believe marketing margins to be high in Sudan
because of the large distances trekked by animals, high information costs at primary and
secondary markets, multiple intermediaries, and formal and informal taxation on animals
trekked to terminal markets. The number of exporters may have decreased recently due to
adverse financing arrangements (Abdel Jabbar, 2004). As a result, some traders say that
competition among buyers has fallen and that the average price of livestock in primary
markets is lower than the export price Table 4. In addition to domestic cost barriers, the
recent appreciation of the Sudanese currency against the US dollar - as a result of higher oil
revenues - has reduced the international competitiveness of Sudanese livestock.
2.18 Livestock supplies in Sudan follow a mixed seasonal pattern. Sales of sheep typically
peak in September to February following the rainy season when feed is abundant 1 . The
1
One study (YAM/CDC study of North Kordofan: Table VI.2) of sheep trading in El Obeid secondary market
from 1994 through 2003 estimated quarterly sales to be: (i) cool season, January to March, 29.5 % of average
5
seasonality of livestock supplies to the terminal markets can lead, depending on the Islamic
calendar to purchasing of sheep in bulk and keeping them in feedlots roughly from April to
June around the market centres for the lean seasons 2 . Supplies to the terminal markets drop
during the hot months of summer as trekking becomes difficult and leads to deterioration of
the condition of sheep due to the scarcity of drinking water and pasture en-route. The
feedlots fill the supply gap in markets and price increases during this time. The seasonality
of beef cattle marketing is less pronounced; as cattle marketing is not affected by the
religious calendar but, it is affected by seasonal variations in feed supplies. The quality of
animals also falls as a result of trekking. In the area of Butana, for example, stocks brought
to Es Soubagh, Shendi and Ed Damer, are generally of poor quality in terms of both meat
and milk productivity, owing to insufficient feed and water along the route.
2.19 Figure 2 shows the livestock marketing channel in general. In the case of sheep, the
marketing sector has three main activities:
(a)
(b)
(c)
Purchase sheep from producers, usually at primary markets and at production
sites;
Collect animals in larger flocks, usually at secondary and terminal markets; and
Distribute the collected sheep to the final consumers (butchers and households)
through a network of wholesalers, retailers, and exporters.
2.20 Livestock markets in Sudan are categorized by volume of transactions, effect on the
domestic trade activity of the market during the year, its location relative to the national
roads and railways and proximity to the nomads routes (Maraheel). Accordingly the
domestic markets are categorized as follows: (i) primary; (ii) secondary; and (iii) terminal.
2.21 Primary markets depend on the movement of nomads during summer and fall. Those
markets are usually patronized by Baggara Arabs of Western Sudan who migrate to south in
the dry season to take advantage of the wetlands grazing, and then move to north in the rainy
season to escape the mud and biting flies and utilize the ephemeral forage in the semi-arid
rangelands. The transaction occurs between the producer and a gallaga, with or without a
broker. Some primary markets are found at the small villages throughout the year, but
supplies are affected greatly by the nomads’ movement.
2.22 Secondary markets are located at the main towns in production areas or other
population centres on the main roads. They are the main suppliers of sheep to the
consumption areas and export. They are characterized by their daily activities year round,
e.g. Nyala, El Fashir, Edaein, Kadogli, El Obeid, Kosti, Kassala, Malakal livestock markets,
etc. The main agents in these markets are gallaga, wakils, and jellaba. The brokers may
work as independent small-scale traders (Jellaba) and some as agents (Wakils) or sub-agents
for the big traders. Middlemen (Sabbaba) are important beside guarantors (Eldamin) for the
completion of the transaction. A second broker may sell to a third broker in the same market
or in another secondary market and this process goes on until the livestock are bulked into
larger lots and reach the terminal markets.
annual sales; (ii) hot season, April through June, 20.3 %; rainy season, July through September, 27.9 %; and
(iv) post-harvest season, October through December, 22.3 %. The corresponding shares for cattle were 26.0 %
15.2 %, 34.5 % and 24.3 % (Table VI.4)
2
Statistics from 2004 (ARSC: p. 29) shows that monthly presentations of male sheep in the Omdurman markets
during the hot season (March through June) are less than 8 % of the annual total and that more than 75 % are
sold in the peak feed supply months of July though December.
6
Figure 2: Livestock marketing channels
The producer
Camp
Wakil
Gallaga
Consumer
Market
Primary
Market
Primary
Sec
Wholesale
butcher
Local trader
Retail butcher
Jallaba
Market
Primary
Whole sale merchant or exporter
Live export
Meat export
Wholesale butcher
Retail butcher
Consumer
Sheep marketing channel in the Sudan
Source: Abdel Jabbar, 2007
2.23 Terminal markets are located far from the main production areas, in the big cities.
They supply the main consumption areas with their needs and prepare sheep and sheep meat
for export. All the livestock agents can be found in the terminal market except may be the
producers. The final transactions in the terminal markets are processed through local traders
(Sabbaba, Jellaba or Wakils). Livestock are said to change hands two to six times between
7
the initial point of purchase and the final point of sale. Terminal market prices may
eventually be twice as high as the secondary prices and four times as high as producer prices.
2.24 Producers are sometimes thought to be at the base of the marketing channel, but most
of those who supply sheep to the markets are not always the producers. Poor knowledge of
markets, frequent migration and irregular settlements far from markets force producers (who
are often nomadic) to sell their animals at their camps or villages through intermediaries.
The following section discusses the intermediaries, from small traders (gallaga), through
middlemen (sabbaba), brokers (wakils), large traders (jallaba) and guarantors (eldamin).
2.25 Small livestock traders (the gallaga) link animal producers and markets. They reach
the nomads at their camps, villages or at the primary markets and buy flocks of about 10-15
heads and sell them at the nearest primary or secondary market with moderate margins. The
gallaga are familiar to the nomads hence, they transact at their districts and serve their tribes;
they build good relationships with the producers which enable them to achieve a good
bargaining position. They also benefit from the lack of market information on the part of
producers and assemble animals at relatively low prices. Sometimes gallaga serve as
brokers to the nomads, selling flocks on behalf of the producers at the primary or secondary
markets in return for a commission.
2.26 In Western Sudan, sabbaba middlemen deal with both sellers and buyers in all
market transactions. They negotiate the price with the buyer and introduce him to the seller.
Some times they are known as (commisongi), the local Arabic word for the commission man,
who performs the secret auctions especially at some secondary (El Obeid) and terminal
(Omdurman) markets. They bring the sheep flocks from various primary or secondary
markets in the central Sudan and sell them at the big consuming centres or the terminal
markets.
2.27 The livestock commission agents are traditionally known as wakils, buy sheep on
behalf of their principals, the difference between them and (gallaga) is that; the latter use
their own capital, while wakils receive daily instructions from their principals including
information about prices and the number of animals to buy. They are usually paid a
commission per head bought. wakils do not use their own money and they do not own the
commodity transacted and hence assume less risk.
2.28 Jallaba is a traditional name for the big livestock merchants or wholesalers. Jallaba
buy animals from production areas. The big ones prefer to stay at terminal markets and send
wakils to the job or buy from the smaller traders. Such speculative activity is practiced when
there is a good expectation that the price differentials between the terminal market and the
secondary market are satisfactory. Jallaba has good information about the local and the
external livestock and meat markets. They are sometimes livestock exporters or wholesale
butchers.
2.29 Eldamin is a guarantor who certifies the animals offered for sale are owned by the
seller. Usually he comes from the same tribe of those whom he guarantees. They get a fee
per animal transacted and paid by the buyer. Eldamin have a minor role for sales in bulk in
terminal market but they are very important in small group transactions.
2.30 Livestock marketing in Butana area covers about 80,000 square kilometres and
crosses 10 administrative localities in five states: Gezira, Gedarif, River Nile, Kassala and
8
Khartoum. The livestock population in Butana is estimated at 9 million heads, composed of
about 19% cattle, 44 % sheep, 30 % goats and 7.5 % camels. In 2004, Butana provided 8 %
of the exports of live sheep to Saudi Arabia and about 37 % of the exports of camels to
Egypt. In addition all goat exports to the Gulf countries come from Butana. Some of the
Butana producers are pure pastoralists, others are sedentary and seasonally transhumant.
2.31 Marketing of animals by the smallholders in Butana is representative of the Sudan in
general. Smallholders sell to other producers within the village, to itinerant traders, and at
primary or secondary markets. There are about 10 primary markets, in the sense that they are
of local importance, they include Shendi, Damer, Soubagh (seasonal market) Um Shadida,
New Halfa, Kassala, El Faw and Abu Delaig. There are also 5 secondary markets that are of
regional importance. They include Gedarif, Er Rattaga, Showak, Tamboul and Um Elgura.
2.32 Almost all primary and secondary markets, excepting Gedarif and Ed Damer are
managed by private individuals who have received concessions from the localities in the
respective states. Gedarif and Ed Damer markets are managed directly by the localities.
With the exception of Tamboul, Gedarif and Ed Damer markets lack fences, water for
animals or people, offices for record keeping, publication, and other amenities.
2.33 Some village markets are of local importance only. They are patronized by people of
the same village and neighbouring villages infrequently, may be once a week. In some cases,
these markets are not officially organized but a group of itinerant traders who come to a
village at certain times during the year, with pick-up trucks loaded with groceries to supply
the village shops. In the case of EL Edaid El Humr village, about 105 km from Gedarif, for
instance, these traders come seasonally to sell consumer commodities and buy animals.
They come from El Faw, about 120 km away, and stay for three to four days. Together with
the proper village markets, they form the primary markets.
2.34 Choosing the suitable marketing channel by the producer depends on the cost of
transportation to the market, which is a function of distance and the number of animals on
offer. Transportation costs during Kharif (the rainy season) increase by about 50 % due to
the poor road conditions which render travel more costly and more risky if animals must be
evacuated for lack of pasture or for health reasons.
2.35 Most sales are conducted after Kharif, when animals are fattened and can fetch better
prices. Production of young stock is thus planned to coincide with this opportune time.
Females are planned to become pregnant during March and to give birth during AugustSeptember. Selling often starts during January-February. Urgent sales, of course, could take
place any time. The timing of sales also, during the last few years, has been coinciding with
the Haj and the primary Muslim holidays of Eid Al Adha, when pilgrims in Mecca buy sheep
to slaughter as Hadi and Muslim households sacrifice an animal to mark the occasion.
During this period of September, October and November, sales of animals, particularly sheep
for exports and domestic consumption almost double.
2.36 The construction of Khartoum - Gedarif - Port Sudan asphalt road encouraged the
establishment of new livestock markets like Er Rattaga, New Halfa, and Showak, which are
now flourishing. At the same time, the drought and the establishment of Kashm El Girba
Scheme negatively affected the old livestock markets of Abu Delaig and Kassala.
9
Market Access and Transportation Costs
2.37 Taking the village of EL Edaid El Humr, Gedarif State, as an example for illustration
of animal transport costs, at a distance of 105 km from Gedarif market, the cost of
transporting a sheep to the market is SD500, while the cost of transport to Tamboul market,
160 km, is SD750, and the cost to Es Soubagh market, about 80 km, is SDD 3 400. Normally
about 25 % of the village's animal sales are concluded within the village to local buyers, 25
% to traders coming to the village and 50 % taken to Gedarif. However, during Kharif (the
rainy season), sellers travel more to Es Soubagh than to Gedarif, because of transportation
problems and difficulties along rough roads that lack crossings along numerous and
sometimes deep wadis. Estimates of variations in sheep selling prices for the different
options are:
i.
ii.
iii.
SD13,500 village level price (selling to breeders within village)
SD 14,000 itinerant traders at the village
SD 15,000 at Gedarif Market
2.38 The secondary markets are of regional importance. Gedarif, Showak, Er Rattaga, Ed
Damer and Tamboul belong to this category. Together with the primary markets, they are
organized by the localities that either manage them directly or transfer the management, on
tender basis, to private individuals. In Butana, only the markets of Ed Damer and Gedarif
are managed by the localities while the rest are managed by private individuals.
2.39 The markets suffer from the absence of clear rules and regulations that organize
trading and define the rights and responsibilities of the stakeholders. They lack all kinds of
services despite the fees and charges paid by the buyers and sellers. There are not always
records of sales (quantities and prices), nor of flows to and from the markets in terms of
numbers and geographical sources of supply and destination. They are just locations for
collecting fees and taxes without such collections always being invested to improve market
operations.
2.40 Local assembly markets are those where animal owners sell to traders who supply
wholesale markets. Primary markets like Shendi and Um Elgura usually operate twice
weekly and they alternate so that producers could have alternative outlets for selling their
animals and traders could have a chance to visit all markets to benefit from arbitrage
activities. Most of the primary markets are run by private contractors who get this right by
winning the tender announced annually by the localities. The localities specify the fees to be
charged for the different animals, usually shared between the buyer and the seller plus a fee
specified for the guarantor who certifies that a person selling an animal owns it. The
guarantor fee is about SD100 for sheep4 and goat and SD300 for cattle and camels, usually
paid by the seller. The market fee vary from one market to another in the different localities
of Butana, and with the type of animal. In Um Elgura livestock market, for instance, the
market fees for goats and sheep is SD500, while for camels and cattle, the fee is SD1000.
2.41 At village markets, traders have a better chance of finding the number of livestock
they are looking for and the market fees are lower (SD 150/head for sheep and goat to be
paid by the buyer, and SD100 to be paid by the seller). Moreover, there is the possibility of
3
4
1 Sudanese Pound (SDG) = 100 Sudanese Dinar (SDD)
Data collected by the author in 2006 from Butana Region.
10
having a discount of about 30% on the market fees, while prices of animals may be about
15% less than at the wholesale market.
2.42 Direct sales take place when animal owners themselves take their animals to the
wholesale secondary market and sell them either inside the market or outside the market to
traders/brokers. The reason for the latter is to avoid the market fees. The markets for this
option are secondary (regional) markets like Gedarif, Tamboul Er Rattaga, Kassala, New
Halfa and Showak.
2.43 Indirect sales are when animals are sold within the village to other animal owners
who may be relatives or neighbours buying animals for fattening and selling at the regional
market.
2.44 Animals intended for export, mainly sheep, are usually young lambs, about 6 month
old and about 23 kilogram live weight. The traders who assemble the sheep from Gedarif
wholesale market, for instance, sell to exporters with delivery at Alkadaro slaughter house in
Khartoum State, on carcass weight basis, at a specified price per kilogram. The costs and
benefits of the different parties involved in such transactions will be shown in the section on
"marketing costs and margins". Some sheep are purchased by wholesale butchers for
slaughtering in Gedarif city itself. Wholesale butchers sell meat on carcass weight basis to
retail butchers who sell to consumers.
The Division of Labour within the Market Channels
2.45 Men trade livestock, as no women were found buying or selling animals in any of the
livestock markets. Even when animal sales take place at the village level with itinerant
traders, it is a man's responsibility to bargain and transact. Women's livestock activities in
Butana are to look after milk goats kept at home. Cattle and camels are milked by men.
During Kharif, when the herds are near the villages, women transform milk into liquid butter
and skimmed milk. Women who follow the herds from other states to Butana during Kharif
are responsible for milking, processing and selling milk and milk products in the market.
Market Flows
2.46 Each of the regional markets of Butana serves a number of markets in the area. This
is made easy by the fact that each market has specific market days that are different from
those of other markets. Gedarif market, for instance, operates on Wednesdays and Sundays
for camels, Mondays and Thursdays for cattle and daily for sheep. Tamboul, on the other
hand, operates on Saturdays and Tuesdays for all types of animals. But terminal markets,
like Omdurman, operate daily and receive animals from all regional markets including
Butana and the animal markets of Western Sudan.
Livestock Flows in Gedarif Market
2.47 Marketable sheep are brought to Gedarif market, for instance, from the eastern and
north eastern part of Gedarif state as far as the area of River Atbara in Kassala state. This
area supplies about 25%, while the northern areas of El Faw and Er Rahad supply about
70%, and the areas of Doka and Showak, supply about 5%. The flows out of Gedarif market
11
go 400 km to Khartoum (55% of the total) in case of sheep for export, Kassala, some 225
Km and even Port Sudan which is some 800 Km away (40% of the total).
Marketing Costs and Margins
2.48
Shendi Primary Market. Marketing costs and margins are usually studied with the
objective of revealing the effectiveness of the channels of distribution and to identify the
difficulties encountered at the different levels if there are any. A University of Khartoum
study estimated the marketing costs and margins of the different participants in the chain of
the markets visited in Butana (Idris, 2006). The study shows variation in marketing margins
depending on the type of animal. The retailer’s (butcher’s) share of the marketing margins,
in Shendi market, for instance, shown in Table 3, is almost the same for sheep and cattle, at
75% for the first and 76% for the latter.
2.49 The producer's share of the consumer price is 67% and 78% for cattle and sheep
respectively. The variation in animal prices by type mainly affects the producer's share of the
consumer's price. This is also true when prices vary for the same type of animal, due to, for
instance, unfavourable Kharif conditions. Livestock prices decline sharply when they are not
fed well enough, but the butcher's margins remain more or less the same. Hence,
supplementary feeding, baling of green fodder, plus some concentrates, in the dry season, is
important for increasing the producer’s revenue.
Table 3: Sudan - Marketing Margins between Producers and Butchers
(carcass weight)
Type
Producer
Margin
Butcher
Margin
Consumer Price
Price/kg
Cattle
SD 670
Price/kg
80 SD
SD 750
(24%)
Sheep
SD 1167
83 SD
250 SD
SD 1000
(76%)
SD 1250
(25%)
250 SD
SD 1500
(75%)
Source: Field survey for IFAD by Babiker Idris, 2006.
2.50 The most important economic activity in Butana is animal husbandry. Butana is
basically used for rainy season pastures (Makhraf) for about three months. The markets are,
generally, buyers markets with numerous suppliers and few buyers. Sellers, as individuals
and in absence of market information, have limited bargaining power. They are usually
confronted with buyers, often wholesalers or butchers, who are aware of the sellers’ weak
bargaining position, their lack of market information and the high transaction costs they
incur.
2.51 Market infrastructure. Livestock markets are undeveloped despite regular collection
of market fees and charges. Because markets lack even minimum infrastructure they are not
really conducive to fair trading. The transaction system which is based on private negotiation
in almost all these markets limits transparency and therefore constrains the ability of prices to
send the right signals to producers about the state of demand in the market.
2.52 Transportation is the most serious market constraint, because owners sell their stock
in regional markets, which usually lie at a distance of 40 to more than100 km. Depending on
12
the distance between a village and the market, up to 10% of the value of the transported
animals must be paid as transport cost. Moreover, since trucks are not designed for
transporting animals, often losses occur when a lorry carries more than its capacity and/or
when there is inadequate care of the transported animals. This seems to be small, but when a
lorry carries animals that belong to different producers, one would expect the loss to be
relatively high for the unlucky owner who looses his animal.
2.53 Due to lack of an official system for dissemination of market information, animal
owners have to sell when they go to the market even if they are offered prices that are lower
than their expectations. These expectations are usually based on their enquiries about prices
in the previous market day. Others may prefer, in case prices are lower than anticipated price
levels, to take their animals back and incur additional costs, while others may wait for the
following market-day, which also means additional costs.
2.54 This investigation confirms the remark of Hussein (2007: p. 23): “A major problem
mentioned in almost all markets covered in the project areas, is that the same fee or charge is
paid more than once as different localities and States insist to collect these levies as they are
left with no other sources of real income.”
2.55 Terms of Trade risks are high in animal production and marketing. When rainfall is
short, crop and pasture yields alike decline. This leads animal owners to sell while food
prices rise. The terms of trade between animals and crops are a valid measure of the risks
facing livestock producers. One measure of risk is the coefficient of variation (cv) of prices,
defined as the standard deviation divided by the mean. The data used for 2.58
From
market interviews, the average sheep purchasing prices at the primary or assembly markets
are about 12,656 SDD, 14,023 SDD and 10,038 SDD per head for El Obeid, El Khewi and
Omdurman respectively. The total marketing costs are about 1,749 SDD, 1,599 SD and
3,322 SDD per head, the total variable cost is about 14,405 SDD, 15,622 SDD and 13,360
SDD and the profit margin is about 1,471 SDD, 1,378 SDD and 2,200 SDD for El Obeid, El
Khewi and Omdurman respectively. Traders of Omdurman gain higher profits per head than
in the other markets, which explain why some traders sell in the terminal market rather in El
Obeid or El Khewi. Table 4 shows the costs, value added, taxes and the margins at the
markets of El Obeid, El Khewi and Omdurman and for export from Port Sudan.
Figure 3 show that the cv of quarterly sorghum prices was 0.47 from 2001 through 2005,
while that for sheep was 0.70 and that for the sheep/sorghum terms of trade was 0.92.
2.56 Omdurman market is the terminal sheep market in Sudan and is supplied from many
secondary and assembly markets. Omdurman market has a diversity of types, ages, and sizes
of sheep (especially in the range of 15 to 25 kg weight) for sale in Khartoum state, and to
supply live sheep and mutton for export.
2.57 In contrast, El Khewi, which represents a very important live sheep exporting market,
the breeds are more homogenous including Hamari, Kabashi, and fewer Baladi. The animals
are relatively bigger in size in the range of 30 to 40 kg for export. El Obeid looks like
Omdurman as a consumption market, but its sheep market resembles that of El Khewi to
some extent as a big consuming area. The prices of sheep offered for export are higher and
affect the mean prices of sheep at El Khewi. For this reason, the purchasing and the selling
prices of sheep are lower in Omdurman rather than El Khewi and El Obeid. Due to this
13
variation, the comparison between the three markets concerning prices and costs may not be
perfect.
2.58 From market interviews, the average sheep purchasing prices at the primary or
assembly markets are about 12,656 SDD, 14,023 SDD and 10,038 SDD per head for El
Obeid, El Khewi and Omdurman respectively. The total marketing costs are about 1,749
SDD, 1,599 SD and 3,322 SDD per head, the total variable cost is about 14,405 SDD, 15,622
SDD and 13,360 SDD and the profit margin is about 1,471 SDD, 1,378 SDD and 2,200 SDD
for El Obeid, El Khewi and Omdurman respectively. Traders of Omdurman gain higher
profits per head than in the other markets, which explain why some traders sell in the
terminal market rather in El Obeid or El Khewi. Table 4 shows the costs, value added, taxes
and the margins at the markets of El Obeid, El Khewi and Omdurman and for export from
Port Sudan.
Figure 3: Terms of Trade between Sorghum and Sheep, Gedarif Market, 2002-2005
(Numbers of bags of sorghum purchased with one male sheep per quarter)
3.00
2.50
2.00
1.50
1.00
0.50
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
Source: Study for IFAD by Babiker Idris, 2006
Internal Trade Financing
2.59 A possible constraint to livestock trade is finance. A recent study (Abdel Jabbar,
2004) shows that livestock traders, who dominate the marketing channel from Western
Sudan to the terminal market at Omdurman, do not often access formal finance and therefore
depend mainly on cash to finance animal purchases and trading costs. The study found that
about 94%, 76% and 80% of the animal traders in the markets of El Obeid, El Khewi (both in
Kordofan State) and Omdurman, respectively, finance purchases from their own sources.
Informal financing is about 21% in El Khewi and Omdurman, and formal bank financing is
only about 2.4%. As capital requirements for transactions are large, and capital is usually
tied up for about 5 months, financing, inter alia, constitutes a barrier to entry and may lead to
a high degree of concentration in the trade.
14
2.60 About 81%, 68% and 67% respectively of the traders of El Obeid, El Khowi and
Omdurman market, respectively, pay for purchases in cash (Abdel Jabbar, 2004). Deferred
and partial payments together constitute between 20% and 33% of transactions while
deferred payment is between 3% and 10%. A possible reason for deferred payment is the
occasional defaults and bankruptcy during the past few years that damaged traditional
relations between buyers and sellers. The traditional mutual trust was actually between
traders and the producers due to extended relations among them and the social linkages that
developed among them that strengthened the barriers to entry even further.
2.61 Some 18% to 32% of traders in the three markets (Abdel Jabbar, 2004) purchased
animals from producers. The first reason is that producers are often not actually market
oriented. They sell animals only when there is need for cash, when there is shortage of feed
due to kharif failure and when animals age and become unproductive. Second, producers, in
their seasonal movement north and south in the states of Kordofan and Darfur, following
pasture and water, are far from animal markets. Traders therefore depend on middlemen and
other agents to buy and assemble animals for them.
Table 4: Sudan - Summary of Sheep Marketing Costs
El Obeid
El Khewi
Secondary
Live Animal
Market
Market
Component
Omdurman
Terminal Market
Export
Sudanese Dinars
12,656
14,023
10,038
17,000
Taxes and official fees
450
388
660
1,025
Variable costs
667
644
924
2,464
Value added
632
567
1,709
1,040
Total Costs
14,405
15,622
13,331
4,530
Sale price
15,876
17,000
15,531
21,530
Purchase price
Shares of market price
Purchase price
0.88
0.90
0.75
0.77
Taxes and official fees
0.03
0.02
0.05
0.05
Variable costs
0.05
0.04
0.07
0.11
Value added
0.04
0.04
0.13
0.05
As % of cost
10.2
8.8
17.2
2.9
As % of purchase price
9.3
8.1
14.7
2.2
Total
1.00
1.00
1.00
1.00
Margins
Source: Extracted from Abdel Jabbar, 2007, and modified
15
Transportation
2.62 Sheep are transported by trucking or trekking. Trekking may take from 45 to 60 days
from the secondary to terminal markets; though more costly on average, it is done when
trucking is not possible during the rains or where there are no roads. Impact of improved
roads on livestock marketing costs is shown in Table 5.
2.63 El Khewi, about 100 kilometres west of El Obeid, has become the terminal of the
newly constructed tarmac road connecting it to El Obeid along the highway to central Sudan
up to Port Sudan. A new animal quarantine site, with 25,000 heads capacity per year,
equipped with all the necessary veterinary services, was established at El Khewi in 2002.
The construction of the road has turned El Khewi into a main market, where exported
animals, thanks to the new quarantine, are shipped directly from there to Port Sudan. In
2003, for instance, about 412,237 heads of sheep were trucked directly from El Khewi to
Port Sudan, which was about 22 % of sheep exported that year. At the same time El Khewi
quarantine has eased the pressure on El Kadro export quarantine located at the outskirts of
Khartoum. The construction of the road, while it has positively affected El Khewi livestock
market, has negatively affected some important traditional main secondary markets like En
Nohud and Ghebaish.
Market Integration
2.64 Market integration is a measure of the market efficiency. One indicator of market
integration is price movements. Monthly live sheep prices were available for six markets
over the period January 1990 through December 2004. The six represent a terminal market
(Omdurman), a path from the southwest of the country comprising Nyala and El Obeid; a
triangle near the area of Butana comprising Medani, Sennar, and El Faw5. The trekking
route from Nyala to El Obeid is about 600 kilometres, El Obeid to Omdurman is another 560
kilometres, giving an average trekking distanced of 1160 kilometres and a journey of some
75-80 days. The mean marketing cost for sheep delivery to the terminal market of
Omdurman is about 24% of the total cost.
Table 5: Sudan - Cost Comparison between Trucking and Trekking of Sheep from
El Obeid to Omdurman
Trucking (0.5 days)
Trekking (30 days)
Cost SDD/ 90 head
Cost SDD/ 100 head
Truck rent
75,000
0
Loading and unloading
6,750
0
Shepherd (two)
10,000
30,000
Shepherd guide
0.00
30,000
Shepherd expenses
1,000
27,000
Drinking water
0.00
15,000
Item
5
Data for El Faw were available only from January 1995 through December 2004.
16
Trader expenses
1,000
21,000
Pass points feed
5,000
0
Losses and death
5,695
31,639
Opportunity cost of capital
0.00
14,405
104,445
169,044
1,160.50
1,690.44
Total
Cost per head
2.66 Despite the high and positive correlation coefficients, a co-integration analysis
(Abdel Jabbar, 2007) of price movement among these markets found that they were not
statistically integrated and concluded that “…each [market] seems to operate independently
at least in the studied period” (Abdel Jabbar, 2007). That is, price changes in one market
were at best weakly or slowly reflected in other markets, apparently because of long
distances, poor road conditions, and resulting high transport costs among those markets.
2.65 Price correlations between markets within the two trials (all P < 0.01) are shown in
Table 6 below:
Table 6: Price Correlations between Markets
Nyala
Nyala
El Obeid
Omdurman
1.000
0.967
0.941
1.000
0.972
El Obeid
Omdurman
Medani
1.000
Medani
Sennar
El Faw
1.000
0.956
0.944
1.000
0.925
Sennar
El Faw
1.000
2.67 A second co-integration analysis (Abdel Jabbar, 2007) using data from 2000 through
2004 after the construction of a new road to the west gave a contrasting result. Statistically
significant co-integration was found among the following markets:
Western region
Omdurman / Elobeid
Omdurman / Elobeid / Nyala
Elobeid / Nyala
Central region
17
Omdurman / Medani
Omdurman / Medani / Elfaw
Omdurman / Elfaw
2.68 Using the 2000-2004 data, the second analysis found substantial improvements in the
transportation of sheep especially after the construction of the western paved road and
(partial) replacement of trekking by trucking. This improvement in market efficiency is
probably also attributable to a reduction in communication costs in the Sudan, notably
through the expansion of the mobile phone network. Table 7 shows the unit root as evidence
of the presence of co-integration among these markets using Johansson's Lamda - Max Test:
Table 7: Johansson's Lamda - Max Test for Co-integration Among Sheep Markets
co-integrated
markets
Null
Hypothesis
(rank vector of
markets)
LamdaMax
Value
Critical
Value
( 5% level of
significance )
r=1
r=2
3.3
3.2
8.1
8.1
r=2
13.3
23.5
r=1
r=2
9.7
14.7
23.5
14.2
r=1
1.3
8.1
Western region
Omdurman/ Elobeid
Omdurman/ Elobeid /
Nyala
Elobeid / Nyala
Central region
Omdurman/ Medani
Omdurman/ Medini /
Elfaw
Omdurman/ Elfaw
Source: Abdel Jabbar, 2007
Veterinary Services
2.69 A disease free area is a zone (country, part of a country, or all or parts of several
countries), as identified by a competent authority, in which specific diseases do not occur.
An area of Low Disease Prevalence in such a zone is also identified by a competent
authority, in which specific diseases occur at low levels and which is subject to effective
surveillance, control or eradication measures.
2.70 Butana is identified as a disease free zone with respect to rinderpest6, despite
veterinary services there being poor. There are seasonal campaigns for vaccination and
treatment, but there is a general complaint about the inadequacy of the services especially the
lack of mobile services to follow the animals during seasonal migrations. Maintenance of
disease free status is essential to preserve export markets and hence should not be
compromised. To maintain the status on the face of animals converging on the Butana areas
from numerous and distant places, it is essential to provide quarantine services at the
6
Areas located north of Lat. 130 are declared as disease free areas.
18
entrance and exit points to Butana in addition to immunization programs against any
endemic diseases as well as facilities for treatment of contagious diseases.
19
III. CONCLUSIONS
3.1
Market access: The growth of the Middle East markets mean good potential for
Sudanese livestock exports. Though Sudan has a transport cost advantage to the Gulf
markets, the latter are open to world competition for quality, price, packaging, market
promotion and sanitary/phytosanitory considerations. Beyond cost, two factors determine
Sudanese competitiveness in the Gulf markets: (i) better meat technology, which allowed
Sudan to compete in the fresh and frozen meat; and (ii) continued strict adherence to the
agreed animal health regimen, to avoid a recurrence of the 2001 Saudi ban.
3.2
Internal costs: The major domestic cost off-farm is transport and hence transport is
the major limitation to profitability of off-farm trading. Truck transport has a cost advantage
per head of about 50 % compared to trekking but this does not mean that an immediate shift
away from trekking is possible or even desirable.
a.
Some of the cost advantage to trucking disappears during the rainy season from
June through September because feeder roads are in bad condition and in some
cases completely impassable;
b.
The apparent cost advantage given to trucking by static cost comparisons is
probably biased in that they begin from collection points and hence overstate the
supply areas that can be reached by trucks.
3.3
While there are no time series data on transport costs, some evidence indicates a fall
in the real costs of livestock marketing in recent years.
a.
There has apparently been a mild real decline in sheep prices over time. The
average 2000-2004 real price of sheep at Omdurman was 15.9 % (p<0.001) less
than that of 1990-1999, El Obeid was 13.7 % less (p<0.01), and Wad Medani was
8.9 % less (p< 0.02).
b.
Second a statistical analysis of prices across markets shows
(Abdel Jabbar 2007). The greater co-integration after 2000
costs of trade between markets fell, apparently owing
improvements between primary and secondary markets in
terminal market and to lower communication costs; and
c.
Third is more anecdotal evidence - from traders interviewed in Kosti market,
from a study of North Kordofan (YAM/CDC, 2004) and from another of Western
Sudan - that trade has become less costly with improvements in transport and in
communications.
greater integration
suggests that real
in part to road
the west and the
3.4
Taxation: As recently as 2001/2002, the tax burden on livestock trade was thought to
be very high (Yam/CDC, 2002). Despite the central government’s measures to eliminate
internal taxation, the states and localities continue to levy some taxes and fees. Attached is
the General Order to Police forces (Annex I) to refrain from collecting taxes. The latter are
the subject of many complaints from market agents and staff of ARSC especially the
allegation that state and locality fees are charged more than once on the same animals.
Based on information provided by the Khartoum Chamber of Commerce and the Ministry of
Finance, the Nominal Rate of Taxation (NRP) for live sheep for the domestic market is
20
estimated at about 5% Table 4. The DTIS does not give such an estimate for sheep, but it
does show that the rate of taxation on cattle is 14.4% of which the Islamic tithe (zakat) is
about 7%. The DTIS remarks at one point that ““…these data do not show the exorbitant
taxes traders have complained about” and data in this report seem to confirm that remark.
3.5
A better measure of domestic tax incidence is the effective rate of taxation on value
added to internal marketing. From Table 4, the effective rate would be (sale price – purchase
price). For El Khewi, El Obeid and Omdurman, the rates would be 14.0%, 13.0% and 11.7%
respectively. From the DTI (for cattle), the rate of taxation would be 26.0% without the
zakat, which is more properly considered a voluntary charitable contribution than a tax. The
effects of export taxation are apparently not very important as a share of the export price or
the domestic purchase price. However, because livestock marketing has low margins, the
rates of effective protection on trading value added between purchase and sale or between
purchase and export, can be quite high.
3.6
Table 4 shows that export prices for sheep are about 23% greater than the domestic
purchase price. The nominal rate of protection, expressed as a percentage of the export price,
is about minus 5%. The effective rate of protection, expressed as a percentage of value
added from domestic purchase to export, would be about minus 41%.
3.7
Taking some average prices and costs, at an estimated Gulf animal price of
US$70/head, the range of the current nominal rate of protection would be from minus 10% at
a “historical” exchange rate of 250 SDD/US$ and about plus 18% at a “recent” exchange rate
of 200. That is, Sudanese exports of live sheep are taxed by about 10 % relative to world
prices at an exchange rate of 250SDD/US$ and protected by about 24% at an exchange rate
of 200SDD/US$. This range would be affected by the facts that: (i) the price for Sudanese
animals in the Gulf market is probably less than that of Australian/New Zeland origins; and
(ii) some of the price wedge between FOB Sudan and the Saudi market is probably
quarantine and other true supply costs and hence is not really taxation. The corresponding
effective rates of protection would be minus 26% and minus 40%.
3.8
A recent comprehensive study (Faki and Ahmed, 2006) of incentives in Sudanese
agriculture from 1955 through 2004 found that sheep and cattle production have been taxed
for many years. They state:
“Rates of assistance to livestock reflect substantial variability with declining rates
till the early 1970s, rising during most of the 1970s, decreasing till towards the
mid-1990s, and then substantially rising thereafter. Rates of assistance to sheep
and cattle were rather consistent and closer to each other. Their average
NRAf/DRAf rates for the whole period were respectively -43% and -33%, while
their NRA/CTE for primary products was slightly lower by about 11%.”
3.9
Faki and Ahmed find that the aggregate rate of taxation (including the effects of the
exchange rate) on sheep exports since 2000 has been 20%, which is lower than in any other
five-year period they studied. They further find that the rate of taxation on cattle exports
(which are much less valuable in total than sheep exports) has been about 33% since 1995.
3.10
Market operations. The DTIS study recommends:
21
“The Ministry of Foreign Trade issued a decree in November 2003 which identified
three main objectives for managing livestock marketing at El Muwelih, namely use
weight in all transactions, use auctions for sales, and to use cash payments for
livestock when sold. This decree has not been implemented. The decree seems to be
the basis for a reasonable policy and would improve transparency and the
efficiency of price formation in sale yards.” There is some debate about whether all
three measures of the decree are really desirable or feasible.
(a)
Weight in all transactions. Experienced traders and butchers would not need to
use weight in livestock transactions because they can judge the value of stock
without weighing them. (The situation is obviously different for retail meat
sales to consumers where meat is typically weighed.). A live animal weight
requirement might make transactions slower and hence more expensive, a
hypothesis which might be confirmed by the known reluctance of traders to use
auctions;
(b)
The use of auctions for sales does seem relevant but, according to officials of
the ARSC, buyers are unwilling to use auctions, even where facilities exist,
because they lack finance for the larger scale transactions that would be
required to maintain a consistent flow of animals through an auction. One
might hypothesize that reducing the share of market taxes paid to the localities
would raise the share of animal sold in markets, compared to those sold outside
markets, and hence make auctions more attractive. One possible reason why
auctions are not used, even where facilities are available, is cartelization by a
few large buyers of live animals, whose market power is such that they can
discourage retail buyers from participating in the auctions.
(c)
The use of cash payments is theoretically relevant but is impossible to enforce
and would further disturb credit relations between traders and butchers. Given
the interest of sellers in cash payments without such a decree, one expects that
there is some market impediment to cash payments that the decree ignores.
IV. RECOMMENDATIONS
4.1
Export marketing: One limited possibility for public sector support to private
livestock exports is matching grants to exporters’ groups for promotion of Sudanese products
and for capacity building among exporters, whether groups or individuals. Providing meat
cuts and packaging technology to enable exporters to penetrate this section of the export
market.
4.2
Trade finance and domestic marketing: While traders argue that lack of finance is a
barrier to entry in livestock marketing, it is difficult to justify a legitimate direct public sector
role in eliminating that barrier through providing finance. Possibilities for public sector
support would be limited to financing road investments or matching grants to traders’
organizations.
4.3
Taxation: The burden of livestock taxation falls mainly on traders and appears to be a
significant share of their trading margins. The revenue from livestock taxation for the central
22
government is trivial, but it may be more significant for state and local governments. Key
recommendations in this regard: (i) eliminate all internal taxation being careful to distinguish
between taxes and quarantine and market operation fees; (ii) eliminate the localities’ share of
the market fees; (iii) the Council of Minister’s decree of May 2006 which abolished all tax
collection points on highways and make it more specific to include tax collection points
along livestock routes; and (iv) transfer sufficient income from the central Government to the
states and localities to compensate them for their respective losses of livestock tax income
including the localities’ share of the market operation fees.
4.4
Market operations and margins: Available data on livestock marketing margins do
not show them to be high by international standards. There is no convincing case that
mandating sales by weight, auctions, and cash payments would be feasible or would serve to
lower marketing costs, hence no specific recommendations are made in this area.
23
REFERENCES
Abdalla, A. M. (2006). Marketing Efficiency and Competitiveness of Sudanese Live Sheep and
Mutton in Export Markets. Unpublished Ph.D. Thesis. University of Khartoum. 2006.
Abdel Jabbar, 2004. Field survey of livestock marketing. University of Khartoum. Unpublished data.
Abdel Jabbar, 2007. Livestock markets in the Sudan. Unpublished PhD dissertation. University of
Khartoum.
Aklilu et al 1002. Aklilu, Yacob, Patrick Irungu and Alemayehu Reda. An Audit of the Livestock
Marketing Status in Kenya, Ethiopia and Sudan (volume I). Pan African Programme for the Control
of Epizootics. Nairobi, Kenya, 2002.
Arab Organisation for Agricultural Development (AOAD), Annual Agricultural Statistics Bulletin,
2004.
ARSC, 2004. Animal Resources Services Company. Statistics for Livestock Markets and Livestock
Exports for the Year 2004. Khartoum, the Sudan. 10th edition. 2004.
DTIS, 2006. World Bank. Sudan – Diagnostic Trade Integration Study. Productivity and Trade in
Agricultural Products, Draft (13 January, 2006).
Faki and Ahmed, 2006. Hamid Hussein Mohamed Faki and Abdelmoneim T. Ahmed. “Distortions to
Agricultural Incentives in Sudan”. Agricultural Economics and Policy Research Centre. Agricultural
Research Corporation, Khartoum. 2006.
Government of the Sudan, 2006. Ministry of Animal Resources and Fisheries (2006). Statistical
Bulletin, No. 14. Khartoum, Sudan.
Government of the Sudan KSA, 2005. Ministry of Planning, Central Department of Statistics (2005).
Foreign Trade Statistics – Riyadh, Saudi Arabia.
Hussein, 2004. Abubaker Ibrahim Hussein, “Sudanese Livestock Export Marketing and
Competitiveness”. Paper prepared for WTO Accession Unit. April 2004.
Hussein, 2007. Abubaker Ibrahim Hussein. Support to Livestock Production and Marketing in
Traditional Rain-fed Farming Areas Project. Working Paper 3: Livestock Markets and Marketing.
Khartoum. 2007.
Idris, 2006. Idris, Babiker I. Butana Integrated Rural Development Project. A Marketing study for
IFAD. Unpublished, Khartoum. 2006.
Williams, 1993. Williams, Timothy O. Impact of livestock pricing policies on meat and milk output in
selected sub-Saharan African countries. ILCA Research Report Number 20. Addis Ababa. 1993.
Western Sudan Resource Management Programme. Working Paper 5a. Market Development and
Marketing.
YAM/CDC. Livestock Marketing Opportunities in NKRDP Area (Bara and Um Rawaba Districts).
Report for the North Kordofan Rural Development Project. 2004.
World Bank, 2003. World Development Report, 2003. World Bank. Washington, DC. 2003.
24
Annex I
Annex: 1 Commissioner General Order & Translation
25
Annex I
Translation
26
Annex II
LIVESTOCK STATISTICS
27
Table A. 1: Animal Resources Share in GDP, 2000-2004
(at real prices of 1981-1982 million LS)
Years
GDP
28923
Animal
Resource Share
2935
2000
%
21.8
2001
14322
3111
21.7
2002
1608.8
3362
20.9
2003
1767.1
371.1
20.9
2004
1733.6
342.7
19.8
Source: MARF – Statistical Bulletin, No. 14.
Table A.2: Livestock Consumption Estimates, 2000-2004
(thousand head)
Year
Number slaughtered
Local consumption (000s mt)
Cattle
Sheep
Goats
Camel
Total
Cattle
Sheep
Goats
Camel
Total
2000
5265
12545
14381
126
32317
658
138
115
19
930
2001
5610
12909
14389
126
33034
701
142
115
19
977
2002
5968
14041
14486
126
34621
746
154
116
19
1035
2003
4767
18495
16042
200
39504
858
222
128
46
1254
2004
5799
18738
16071
227
40835
860
225
129
35
1249
Source: MARF – Statistical Bulletin, No. 14.
28
Table A.3: Livestock Off-Take Estimates, 2000-2004
(thousand head)
Year
Camels
Off-take
No-of
Goats
Off-take
animals
Sheep
No-of
Off-take
Cattle
No-of
animals
Off-take
No-of
animals
animals
2000
526
3108
15381
38548
20545
46095
7265
37093
2001
526
3203
15389
39952
20909
47043
7610
38325
2002
526
3342
15486
41485
44041
48136
7968
39479
2003
550
3503
17292
42030
22495
48440
6267
39669
2004
577
3724
17321
42179
22738
48910
7299
39760
Source: Ministry of Animal Resources and Fisheries (MARF), Statistical Bullet in for Animal Resources,
No. 14. Khartoum.
Table A.4: Live Sheep and Goat Imports to the Middle East
(Value in US$ Million; Numbers in 1000 Head) 1
Importer
2002
2003
2004
No.
Value
No.
Value
No.
Value
No.
Value
Algeria
0.02
0.05
1.9
0.1
‫ـــ‬
‫ـــ‬
0.4
0.02
Bahrain
363.4
19.5
415.0
19.7
456.3
20.6
433.9
22.1
-
-
119.0
4.3
68.2
2.9
108.9
5.1
Emirates
488.4
18.8
488.4
18.8
488.3
18.8
883.8
33.1
Jordan
903.0
40.8
575.9
24.8
563.2
26.9
560.0
25.2
Kuwait
1490.5
89.2
1901.1
95.0
1501.2
63.2
1774.7
70.5
Lebanon
312.5
32.5
541.3
60.9
519.3
41.4
407.2
33.1
Libya
1.4
0.03
9.3
1.5
9.3
1.5
65.1
6.1
Oman
332.9
21.1
1581.3
46.8
1276.5
43.5
1433.6
46.29
Palestine
26.0
1.8
26.0
1.8
17.3
1.4
24.9
3.3
Qatar
342.6
32.0
14.1
33.0
14.7
38.7
285.0
32.8
Saudi Arabia
4333.5
351.2
4333.5
351.1
5588.3
477.6
4680.4
301.1
68.0
4.4
103.7
5.2
47.3
4.5
166.8
8.6
Tunisia
‫ـــ‬
‫ـــ‬
‫ـــ‬
‫ـــ‬
‫ـــ‬
3.3
0.3
Yemen
847.6
22.7
669.8
18.2
610.9
16.2
430.2
11.5
Total
9510.1
634.2
10780.4
681.7
11161.1
757.6
11258.3
599.0
Egypt
Syria
1
Average, 1997-2001
Includes the slaughtered and those for breeding. Source: AOAD, 2005
29
.
Table A.5: Sheep and Goat Meat Imports to the Middle East
(Value $US millions; Quantity 1000 mt)
Importer
Annual average, 1996-
2001
2002
2003
2000
Quantity
Value
Quantity
Value
Quantity
Value
Quantity
Value
Algeria
3.04
6.51
2.50
4.44
0.67
1.24
1.65
3.40
Bahrain
1.71
5.06
1.69
4.51
1.76
4.46
1.72
4.45
Djibouti
0.01
0.02
0.01
0.02
0.02
0.04
0.02
0.05
Egypt
0.33
0.62
0.70
1.57
1.96
3.45
1.09
2.43
Emirates
21.25
42.59
21.25
42.59
27.05
67.76
28.33
70.86
Jordan
9.42
20.13
8.72
16.18
11.51
18.24
10.72
20.02
Kuwait
4.38
9.50
4.38
9.50
4.60
8.41
2.83
6.17
Lebanon
0.43
1.06
0.65
1.62
0.51
1.26
0.36
0.80
Libya
14.93
18.53
14.93
18.53
8.30
20.13
1.04
3.55
Morocco
0.04
0.12
0.08
0.20
0.07
0.14
0.61
1.51
Oman
8.62
16.36
9.19
15.25
9.09
15.38
8.47
13.97
Qatar
6.03
14.38
4.34
9.14
3.25
7.69
2.36
5.19
Saudi
Arabia
Tunisia
1.90
92.95
45.07
100.70
44.55
85.17
48.57
98.91
‫ـــ‬
‫ـــ‬
‫ـــ‬
‫ـــ‬
--
--
0.10
0.26
Yemen
0.39
0.39
0.49
0.54
0.25
0.25
0.18
0.31
Total
112.48
228.22
114.00
224.79
113.59
233.62
108.05
231.88
Source: AOAD, 2004.
30
Table A.6: Imports of Live Sheep to Saudi Arabia by Country
Average CIF Jeddah Prices, Market Shares, and Numbers, 2000-2003
Country
2000
2001
2002
2003
Australia
Botswana
Djibouti
Egypt
England
Ethiopia
Jordan
New Zealand
Other
Qatar
Romania
Somalia
Sudan
Syria
Total
Uruguay
Yemen
431,215
(10.5)
3,420
18,419
20,667
13,210
27,611
1,144
20,954
249,500
1,399,599
869,182
(21.2)
645,167
(15.8)
4,094,353
109,996
284,269
1,516,897
(63.7)
10,183
76,059
32,819
84,017
13,416
140,529
394,906
(16.6)
2,383,172
114,346
-
1,803,401
(36.9)
106,732
32,158
1,464
1,340,982
(27.4)
1,601,939
(32.8)
4,886,676
-
1,472,357
(35.4)
119,435
21,435
164,796
1,306,835
(31.4)
1,060,583
(25.5)
4,161,906
-
Av. Price
(000 S.R)/ton
for 2003
4.93
6.05
11.42
Note: Figures in parenthesis are market shares of the main competitors.
Source: Ministry of Planning, Central Department of Statistics, Foreign Trade Statistics – Riyadh, Saudi
Arabia.
31
Table A.7: Imports of Sheep Meat to Saudi Arabia by Country, 2000-2003,
C.I.F. Jeddah- Prices and Market Shares
Country
Pakistan
Carcasses-lamb-fresh
“ “ sheep- “
Sudan
Carcasses-lamb-fresh
“ “ sheep- “
Australia
Carcasses-lamb-fresh
“ “ sheep- “
Other sheep cuts-fresh or frozen
New Zealand
Carcasses-lamb-fresh
“ “ sheep- “
Other sheep cuts-fresh or frozen
Turkey
Carcasses-lamb-fresh
“ “ sheep- “
Other countries
Carcasses-lamb-fresh
“ “ sheep- “
Total
Carcasses-lamb-fresh
“ “ sheep- “
*Other cuts, fresh or frozen
Total
Quantity (M.T.)
2002
2003
Av. Price
000 SR/ton
for 2003
2000
2001
Mkt.
Share for
2003 (%)
745
1035
366
363
337
290
1,756
717
11.38
12.02
63
11
798
4,096
264
1,175
480
3,780
512
5,059
11.42
11.80
19
76
1,233
726
20,910
623
569
15,454
379
185
22,660
309
22,660
17.95
7.73
11
62
438
220
18,083
77
218
12,701
239
1113
9,506
152
756
13,800
15.32
11.72
9.00
6
11
38
921
42
186
-
-
-
-
-
100
52
79
306
118
89
38
119
4,235
1,595
1,553
2,767
6,171
2,631
5,457
6651
38993 28,155 32,166 36,460
49,399 32,381 39,176 45,878
Source: Ministry of Planning, Central Department of Statistics, Foreign Trade Statistics – Riyadh, Saudi Arabia.
32
1.0
2.0
List of Sudan MDTF Publications
1- First Progress Report, March 31, 2006, North & South Sudan, MDTF-N-1/ MDTF-S-1
2- Second Progress Report, June 30, 2007, North & South Sudan, MDTF-N-2/ MDTF-S-2
3- Export Marketing of Sudanese Gum Arabic, Sector Policy Note, December 31, 2007,
North Sudan, MDTF-N-3
4- Livestock Marketing in Eastern and Central Sudan, Sector Policy Note, December 31,
2007, North Sudan, MDTF-N-4