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 Arab Organisation for Agricultural Development ARSC Animal Resources Service Company CPA Comprehensive Peace Agreement FAO Food and Agricultural Organization FNC Forest National Corporation FOB (also f.o.b.) Free on Board DTIS Diagnostic Trade Integration Study GAC Gum Arabic Corporation GDP Gross Domestic Product GNU Sudan Government of National Unity GOS Government of Sudan HPS Hand Picked Selected IFAD International Fund for Agricultural Development JAM Joint Assessment Mission JECFA Joint Expert Committee on Food Additives MDTF Multi-Donor Trust Fund MDTF–N Multi-Donor Trust Fund - National MDTF–S Multi-Donor Trust Fund - South MFNE Ministry of Finance and National Economy (GNU) MFT Ministry of Foreign Trade (GNU) MT Metric Ton OC Oversight Committee RVT Rift Valley Fever SC Sudan Consortium SDD Sudanese Dinars SDG Sudanese Pounds SPLM Sudanese People Liberation Movement SR Saudi Riyal SSA Sub-Saharan Africa TLU Tropical Livestock Unit TS Technical Secretariat WB World Bank WHO World Health Organization

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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

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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

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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 Corina van der Laan Chair of MDTF-N Oversight Committee Co-chair of MDTF-N Oversight Committee

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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.

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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:-

Description of current market structure and marketing arrangements, including value chains for sheep and cattle from major production areas to Khartoum and export markets;

Identification of constraints to the existing marketing system, market management, taxation, transport costs, export arrangement, animal health, and product standards.

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.

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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)

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50

100

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200

250

300

350

400

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500

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1996

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1998

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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.

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Table 1: Sudan - Live Sheep Exports by Market

(‘000 of animals) Market 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

Saudi Arabia* 727.6 0 1600.6 1310.0 1701.0 1268.0

U.A.E. 2.2 0 0.006 5.4 2.0 1.8

Total 731.2 15.5 1602.6 1315.4 1704.0 1271.8

* 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 ata, 2006. dNote: 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

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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 abundant1. 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

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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 seasons2. 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) Purchase sheep from producers, usually at primary markets and at production sites;

(b) Collect animals in larger flocks, usually at secondary and terminal markets; and (c) 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.

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Figure 2: Livestock marketing channels

The producer

Wakil Gallaga

Consumer

Local trader Wholesale butcher

Retail butcherJallaba

Wholesale butcher Whole sale merchant or exporter

Retail butcherMeat export Live export

Consumer

Sec

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

Camp

Market Primary

Market Primary

Market Primary

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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

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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 August-September. 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.

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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 SDD3400. 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. SD13,500 village level price (selling to breeders within village) ii. SD 14,000 itinerant traders at the village

iii. 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 1 Sudanese Pound (SDG) = 100 Sudanese Dinar (SDD) 4 Data collected by the author in 2006 from Butana Region.

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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

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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

Price/kg

Margin Butcher

Price/kg

Margin Consumer Price

Cattle SD 670 80 SD

(24%)

SD 750 250 SD

(76%)

SD 1000

Sheep SD 1167 83 SD

(25%)

SD 1250 250 SD

(75%)

SD 1500

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

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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

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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)

-

0.50

1.00

1.50

2.00

2.50

3.00

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.

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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 Omdurman

Secondary

Market

Live Animal

Market Terminal Market Export

Component Sudanese Dinars

Purchase price 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

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

Margins

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

Source: Extracted from Abdel Jabbar, 2007, and modified

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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) Item

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

5 Data for El Faw were available only from January 1995 through December 2004.

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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

Total 104,445 169,044

Cost per head 1,160.50 1,690.44

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 El Obeid Omdurman

Nyala 1.000 0.967 0.941

El Obeid 1.000 0.972

Omdurman 1.000

Medani Sennar El Faw

Medani 1.000 0.956 0.944

Sennar 1.000 0.925

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

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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)

Lamda- Max

Value

Critical Value

( 5% level of significance )

Western region

Omdurman/ Elobeid r = 1 3.3 8.1 Omdurman/ Elobeid / Nyala

r = 2 3.2 8.1

Elobeid / Nyala r = 2 13.3 23.5 Central region Omdurman/ Medani r = 1 9.7 23.5 Omdurman/ Medini / Elfaw

r = 2 14.7 14.2

Omdurman/ Elfaw r = 1 1.3 8.1 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.

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entrance and exit points to Butana in addition to immunization programs against any endemic diseases as well as facilities for treatment of contagious diseases.

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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 greater integration (Abdel Jabbar 2007). The greater co-integration after 2000 suggests that real costs of trade between markets fell, apparently owing in part to road improvements between primary and secondary markets in the west and the 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.

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

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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:

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“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

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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.

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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.

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 Animal Resource Share

%

2000 28923 2935 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 Goats Sheep Cattle

Off-take No-of

animals

Off-take No-of

animals

Off-take No-of

animals

Off-take No-of

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 Average, 1997-2001 2002 2003 2004

No. Value No. Value No. Value No. Value

Algeria 0.02 0.05 1.9 0.1 ــــــ 0.4 0.02

Bahrain 363.4 19.5 415.0 19.7 456.3 20.6 433.9 22.1

Egypt - - 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

Syria 68.0 4.4 103.7 5.2 47.3 4.5 166.8 8.6

Tunisia ـــ ـــ ــــــ 0.3 3.3 ـــ

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

1 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-

2000

2001 2002 2003

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

1.90 92.95 45.07 100.70 44.55 85.17 48.57 98.91

Tunisia ـــ ـــ ــــــ -- -- 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

31

Table A.6: Imports of Live Sheep to Saudi Arabia by CountryAverage CIF Jeddah Prices, Market Shares, and Numbers, 2000-2003

Country 2000 2001 2002 2003 Av. Price (000 S.R)/ton

for 2003 Australia 431,215

(10.5) 1,516,897

(63.7) 1,803,401

(36.9) 1,472,357

(35.4) 4.93

Botswana 3,420 - - - Djibouti 18,419 - - - Egypt 20,667 10,183 - - England 13,210 - - - Ethiopia 27,611 - - - Jordan 1,144 76,059 106,732 119,435 New Zealand - 32,819 32,158 - Other 20,954 84,017 1,464 21,435 Qatar 249,500 13,416 - - Romania - 140,529 - 164,796 Somalia 1,399,599 - - - Sudan 869,182

(21.2) - 1,340,982

(27.4) 1,306,835

(31.4) 6.05

Syria 645,167 (15.8)

394,906 (16.6)

1,601,939 (32.8)

1,060,583 (25.5)

11.42

Total 4,094,353 2,383,172 4,886,676 4,161,906 Uruguay 109,996 114,346 - - Yemen 284,269 - - -

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.

32

Table A.7: Imports of Sheep Meat to Saudi Arabia by Country, 2000-2003, C.I.F. Jeddah- Prices and Market Shares

Quantity (M.T.) Country

2000 2001 2002 2003 Av. Price 000 SR/ton

for 2003

Mkt. Share for 2003 (%)

Pakistan 745 366 337 1,756 11.38 63Carcasses-lamb-fresh

“ “ sheep- “ 1035 363 290 717 12.02 11Sudan

798 264 480 512 11.42 19Carcasses-lamb-fresh “ “ sheep- “ 4,096 1,175 3,780 5,059 11.80 76Australia

1,233 623 379 309 17.95 11726 569 185 - - -

Carcasses-lamb-fresh “ “ sheep- “ Other sheep cuts-fresh or frozen 20,910 15,454 22,660 22,660 7.73 62New Zealand

438 77 239 152 15.32 6220 218 1113 756 11.72 11

Carcasses-lamb-fresh “ “ sheep- “ Other sheep cuts-fresh or frozen 18,083 12,701 9,506 13,800 9.00 38Turkey

921 186 - - - -Carcasses-lamb-fresh “ “ sheep- “ 42 - - - - -Other countries Carcasses-lamb-fresh “ “ sheep- “

10052

79306

11889

38119

1.02.0

Total Carcasses-lamb-fresh “ “ sheep- “

4,2356,171

1,5952,631

1,5535,457

2,7676651

*Other cuts, fresh or frozen 38993 28,155 32,166 36,460Total 49,399 32,381 39,176 45,878Source: Ministry of Planning, Central Department of Statistics, Foreign Trade Statistics – Riyadh, Saudi Arabia.

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