Download This PaperHow Costly is using Livestock as a Saving Device? A Note on Meat Prices during Food Shortages
Tinbergen Institute Discussion Paper 2020-021/V
60 Pages Posted: 15 May 2020 Last revised: 15 Mar 2022
Date Written: June 30, 2020
Abstract
We measure to what extent the value of livestock is reduced during food shortages. For this purpose we exploit Malawian monthly market prices of meat and maize – the major staple food in Malawi – for 72 locations (towns, villages and markets) from January 1991 to December 2009. We show that drops in the meat–maize terms of trade are associated with food shortages and decreases during food shortages in local markets with 27% to 85%. The evidence is consistent with increased livestock sales during food shortages, but the drop in meat–maize terms of trade arises primarily due to increases of maize prices. Our results are robust to spatial correlation and various other threats. Similar drops in livestock value are shown to occur in other SSA countries. The drop in meat–maize terms of trade reduces the value of livestock – a major savings device in SSA countries – at the very moment livestock is sold on the market to purchase staple foods. Like produced staple foods, agricultural households systematically sell low. To bridge food shortage periods savings instruments are needed that do not lose value when liquidated. A few policy options are discussed. Grain storage at the household level appears most promising.
Keywords: Food Security, Saving, Drought, Livestock, Subsistence Farming, Malawi, Africa
JEL Classification: O16, D19, R12, O55, Q13
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