Cattle Markets Integration and Price Discovery in Three Developing Countries of Mali, Kenya, and Tanzania

One of the growing agricultural subsectors in developing countries is livestock. Livestock and livestock products account for a third of the agricultural gross output. However, the lack of viable livestock market information systems to increase efficiency of markets and support the decision making of traders, pastoralists, and policy makers are still an obstacle for a full development of this subsector. It is along these lines that the USAID, through the Global Livestock-Collaborative Research Support Program, supported the introduction of livestock market information systems in Kenya and Tanzania in 2003, and later in Mali in 2007. The overall objective of the dissertation is to test for cattle markets integration in three African developing countries of Mali, Kenya, and Tanzania. One way of assessing the efficiency of market and the impacts of liberalization policies is to test for market integration and price transmission. We also analyzed price leadership among the markets in each of the three case studies. Autoregressive models (vector autoregressive models and error correction model) were used to determine the level of cattle market integration. The results show a low level of cattle markets integration in Mali. The cattle markets in Mali are more-or-less independent with regard to price transmission among markets. Kenya cattle markets showed a good level of integration among the markets. Chepareria market in the Rift Valley region (west) seemed to lead other markets in price signal transmission. Tanzanian cattle markets exhibited a higher level of integration with Pugu market, in Dar es Salaam, leading other cattle markets in price signal transmission. In conclusion, the cattle markets in Tanzania and Kenya appeared to have a relatively higher level of market integration compared to the cattle markets in Mali. There is a reasonable belief that the time the livestock market information system has been in place, in each country, played a role in the market integration process. More time and better communications seem to have allowed the market actors to learn arbitrage skills and strengthen their trade relationships that ultimately led to the market integration.