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Estimation of Supply Response of Livestock Products: The Case of Kajiado District

Published in Economics (Volume 5, Issue 1)
Received: 5 August 2015     Accepted: 12 August 2015     Published: 25 February 2016
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Abstract

During early 1970s and early 1980s economic conditions in general had been favourable for the Kenyan farm sector. Following market liberalization in the late 1980s, farmers and in particular livestock farmers experienced economic hardship. The economic situation facing livestock industry was characterized by wide fluctuation and unpredictability of the livestock and livestock product prices and uncertainity in livestock production and marketing. These shocks coupled with economic conditions in the livestock sector rendered profit-oriented decision-making by livestock farmers and other participants in the industry difficult. The objective of this study was therefore to estimate the livestock products supply responses using an error correction method. The estimators of the model were derived by way of regression and correlation after subjecting the data collected to vigorous testing for stationarity using Augmented Dick-Fuller test. Conclusions were made on the basis of R2 (coefficient of determination) as well as the t statistic. The results indicate that the estimated short run supply function, live cattle and cattle hides were price elastic while sheep and goats were inelastic. The long run supply response was positive although inelastic for live cattle and goats while cattle hide was elastic. The results also showed positive short run price elasticity. On the basis of t-value, the findings were conclusive with all the variables analyzed being statistically significant. The study also found that live cattle and cattle hide supply adjust to equilibrium levels quite fast. These results suggest that livestock farmers in the study area adjust their supply quiet early, probably as soon as they gain the slightest indications that the market signal would be permanent.

Published in Economics (Volume 5, Issue 1)
DOI 10.11648/j.eco.20160501.12
Page(s) 8-14
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2016. Published by Science Publishing Group

Keywords

Error Correction Model, Livestock Products, Long Run, Short Run, Price Elasticity, Supply Response

References
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[2] M. Odhiambo, ‘‘Review of the literature on pastoral economics and marketing,’’ World Initiative for Sustainable Pastoralism, IUCN EARO, Kenya, 2006.
[3] Republic of Kenya, ‘‘National Development Plan 2002-2008: Effective Management for Sustainable economic Growth and poverty Reduction,’’ pp30. Kenya, 2002.
[4] Republic of Kenya, ‘‘Geographic Dimensions of Well-Being in Kenya. Vol. 1: Where are the Poor?’’ From Districts to Locations. Central Bureau of Statistics (CBS), Ministry of Planning and National Development, Central Bureau of Statistics (CBS) in collaboration with International Livestock Research Institute (ILRI). CBS and ILRI, Nairobi, Kenya, pp 164, 2003
[5] J. Omiti, and P. Irungu, ‘‘Institutional and policy issues relevant to pastoral development in Kenya,’’ Discussion paper no. 031/2002, 2002.
[6] Y. Aklilu, ‘‘Critical issues impacting livestock trade in Kenya, Ethiopia and Sudan,’’ Paper presented at the 10th annual conference of Ethiopian, Ethiopia, 2002.
[7] K. Smith, C. B. Barrett, and W. B. Paul, ‘‘Participatory Risk Mapping for Targeting Research and Assistance: An application among East African pastoralists,’’ Mimeo, 1999.
[8] D. Bailey, C. B. Barrett, P. D. Little, and F. Chabari ‘‘Livestock markets and risk management among East African pastoralists: Areview and research agenda. GL-CRSP Pastoral Risk Management Project Technical Report No. 03/99, Utah State University, Logan, 1999, pp 46.
[9] D. P. Kariuki, and W. Letitiya, ‘‘Livestock production and health challenges in pastoral areas, Samburu District,’’ Kenya, Kenya Agricultural Research Institute (KARI), Nairobi, 1996.
[10] Republic of Kenya ‘‘Kajiado district Vision and Strategy: 2005-2015,’’ Ministry in the Office of the President, pricewaterhouse coopers, Arid Lands Resources Management Project, July 2005, Kenya.
[11] S. Bekure, P. N. De Leeuw, B. E. Grandin, and P. J. H. Neate, ‘‘Maasai herding: An analysis of the livestock production system of Maasai pastoralists in eastern Kajiado District,’’ Kenya, ILCA Systems study 4, ILCA (International Livestock Centre for Africa), Addis Ababa, Ethiopia, 1991
[12] A. W. Mukhebi, H. C. Knipscheer, and G. Sullivan, ‘‘The impact of food crop production on sustained livestock production in semi-arid regions of Kenya,’’ Agricultural systems vol. 35(4), pp339-351, 1991.
[13] I Scoones, ‘‘The economic value of livestock in the communal areas of southern Zimbabwe,’’ Agricultural system vol. 39(2), pp339-359, Zimbabwe, 1992.
[14] Republic of Kenya, ‘‘Livestock marketing from pastoral areas in Kenya: A Strategy for Pastoral Development,’’ A Report by Arid Lands Resources Management Project in conjunction with SNV, OXFAM and World concern. Office of the President, Nairobi, Kenya, 2000.
[15] M. J. Osborne, ‘‘The supply functions of a profit-maximizing price-taking firm,’’ 1997, http://www.economics.utoronto.ca/osborne/2×3/tutorial/PROMAX.HTM.
[16] M. Nerlove, ‘‘The dynamics of supply: Estimation of farmers’ response to price,’’ Baltimore, Johns Hopkins, 1958.
[17] L. O. Ndzinge, J. M. Marsh, and R. C. Greer, ‘‘Herd inventory and slaughter supply response of Botswana beef cattle producers,’’ Journal of Agricultural Economics, Vol. XXXV, No. 1. 1984.
[18] A Lapodini, ‘‘An econometric model of the U.S.A beef-cattle industry,’’ A PhD dissertation in Agriculture, Texa Tech University, U.S.A. 1989.
[19] D. Aadland, ‘‘The economics of cattle supply,’’ Working Papers 2000-11, Department of Economics, Utah State University, Logan, 2000.
[20] M. B. Dastagiri, ‘‘Demand and supply projections for livestock products in India, National Centre for Agricultural Economic and Policy Research, New Delthi, India 2004.
[21] D. M. Nyariki, ‘‘Price response of herd off-take under market liberalization in a developing cattle sector: panel analysis applied to Kenya’s ranching,’’ Environment and Development Economics: pp 1-18, Cambridge University Press, 2008.
[22] S. Almon, ‘‘The distributed lag between capital appropriations and expenditures,’’ Econometrica, vol. 33, pp178-196, 1965.
[23] H. Kelejan, and W. E. Oates, ‘‘Introduction to Econometrics: Principles and Applications,’’ New York: Harper and Row, Publishers, 1974.
[24] D. A. Dickey, and W. A. Fuller, ‘‘Distribution of the estimators for autoregressive time series with a unit root,’’ Journal of the American Statistical Association, vol. 74, pp 427–431, 1979.
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  • APA Style

    Manyeki John Kibara, Ruigu George, Mumma Gerald. (2016). Estimation of Supply Response of Livestock Products: The Case of Kajiado District. Economics, 5(1), 8-14. https://doi.org/10.11648/j.eco.20160501.12

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    ACS Style

    Manyeki John Kibara; Ruigu George; Mumma Gerald. Estimation of Supply Response of Livestock Products: The Case of Kajiado District. Economics. 2016, 5(1), 8-14. doi: 10.11648/j.eco.20160501.12

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    AMA Style

    Manyeki John Kibara, Ruigu George, Mumma Gerald. Estimation of Supply Response of Livestock Products: The Case of Kajiado District. Economics. 2016;5(1):8-14. doi: 10.11648/j.eco.20160501.12

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  • @article{10.11648/j.eco.20160501.12,
      author = {Manyeki John Kibara and Ruigu George and Mumma Gerald},
      title = {Estimation of Supply Response of Livestock Products: The Case of Kajiado District},
      journal = {Economics},
      volume = {5},
      number = {1},
      pages = {8-14},
      doi = {10.11648/j.eco.20160501.12},
      url = {https://doi.org/10.11648/j.eco.20160501.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20160501.12},
      abstract = {During early 1970s and early 1980s economic conditions in general had been favourable for the Kenyan farm sector. Following market liberalization in the late 1980s, farmers and in particular livestock farmers experienced economic hardship. The economic situation facing livestock industry was characterized by wide fluctuation and unpredictability of the livestock and livestock product prices and uncertainity in livestock production and marketing. These shocks coupled with economic conditions in the livestock sector rendered profit-oriented decision-making by livestock farmers and other participants in the industry difficult. The objective of this study was therefore to estimate the livestock products supply responses using an error correction method. The estimators of the model were derived by way of regression and correlation after subjecting the data collected to vigorous testing for stationarity using Augmented Dick-Fuller test. Conclusions were made on the basis of R2 (coefficient of determination) as well as the t statistic. The results indicate that the estimated short run supply function, live cattle and cattle hides were price elastic while sheep and goats were inelastic. The long run supply response was positive although inelastic for live cattle and goats while cattle hide was elastic. The results also showed positive short run price elasticity. On the basis of t-value, the findings were conclusive with all the variables analyzed being statistically significant. The study also found that live cattle and cattle hide supply adjust to equilibrium levels quite fast. These results suggest that livestock farmers in the study area adjust their supply quiet early, probably as soon as they gain the slightest indications that the market signal would be permanent.},
     year = {2016}
    }
    

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  • TY  - JOUR
    T1  - Estimation of Supply Response of Livestock Products: The Case of Kajiado District
    AU  - Manyeki John Kibara
    AU  - Ruigu George
    AU  - Mumma Gerald
    Y1  - 2016/02/25
    PY  - 2016
    N1  - https://doi.org/10.11648/j.eco.20160501.12
    DO  - 10.11648/j.eco.20160501.12
    T2  - Economics
    JF  - Economics
    JO  - Economics
    SP  - 8
    EP  - 14
    PB  - Science Publishing Group
    SN  - 2376-6603
    UR  - https://doi.org/10.11648/j.eco.20160501.12
    AB  - During early 1970s and early 1980s economic conditions in general had been favourable for the Kenyan farm sector. Following market liberalization in the late 1980s, farmers and in particular livestock farmers experienced economic hardship. The economic situation facing livestock industry was characterized by wide fluctuation and unpredictability of the livestock and livestock product prices and uncertainity in livestock production and marketing. These shocks coupled with economic conditions in the livestock sector rendered profit-oriented decision-making by livestock farmers and other participants in the industry difficult. The objective of this study was therefore to estimate the livestock products supply responses using an error correction method. The estimators of the model were derived by way of regression and correlation after subjecting the data collected to vigorous testing for stationarity using Augmented Dick-Fuller test. Conclusions were made on the basis of R2 (coefficient of determination) as well as the t statistic. The results indicate that the estimated short run supply function, live cattle and cattle hides were price elastic while sheep and goats were inelastic. The long run supply response was positive although inelastic for live cattle and goats while cattle hide was elastic. The results also showed positive short run price elasticity. On the basis of t-value, the findings were conclusive with all the variables analyzed being statistically significant. The study also found that live cattle and cattle hide supply adjust to equilibrium levels quite fast. These results suggest that livestock farmers in the study area adjust their supply quiet early, probably as soon as they gain the slightest indications that the market signal would be permanent.
    VL  - 5
    IS  - 1
    ER  - 

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Author Information
  • Section of Socioeconomics and Biometric, Kenya Agricultural and Livestock Research Organization, Arid and Rangeland Research Institute - Kiboko, Makindu, Kenya

  • School of Economics, University of Nairobi, Nairobi, Kenya

  • School of Economics, University of Nairobi, Nairobi, Kenya

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