Impact of Environmental Risk on Livestock Commodity Trade in SACU
Explore the impact of environmental risks on livestock commodity trade in the SACU region, focusing on the challenges faced by small-scale farmers and the appropriateness of finance alternatives. The study delves into the methodology, empirical models, and results to understand the correlation between environmental factors and trade dynamics.
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Impact of Environmental Risk on Impact of Environmental Risk on Livestock Commodity Trade in SACU Livestock Commodity Trade in SACU Mlipha, S.S.B; Blignaut, C.B; Kalaba, M. UNISWA Research Centre; University of Pretoria
Introduction According to World Bank, (2010); By the year 2010, 1.5 billion people made their living on small family farms. However, the estimated investment into the sector was a meagre 4%. This led researchers to conclude that there was a general lack of funding in small-scale agriculture.
Intro. Contd The challenges facing small-scale farmers are well documented in the literature lack of access to credit; These include: : lack of access to credit; inability to access foreign markets; low production capacity; overreliance on the physical environment; lack of insurance. Small-scale farmers from developing countries are most vulnerable to risk.
Objective Study seeks to determine impact of environmental risks on livestock commodity trade in SACU to determine the appropriateness of finance alternatives (value chain finance)
Methodology Gravity Model ?,??? (1) ???= ? ???,?? Where; Xijis trade, Yijis a measure of economic size (proxied by GDP), Dijis the distance between i and j, ijis the error term. ?,??? Environmental Risk Index ??????= (???? ?)???+(???? ?)??? Where; ERIijis the environmental risk index, Rain is average annual precipitation, Temp is average annual temperature, is the assigned weight. (2) Model Specification and Estimation ??????= ? + ??????+ ??????+ ??????+ ???????+ ???????+ ?1???????+ ?2???????+ ?1????????+ ?2??????+ ?3?????+ ?3??????????+ ?4??????+ ??+ ??+ ??? (3)
Methodology Gravity Model ERI Empirical Model Trade ERI Livestock commodity trade Economic size Precipitation Economic size Distance Temperature Distance E.S. per capita E.S. per capita Conditioning variables ERI Conditioning variables
Results Table 1: Statistical properties of the indicators that compose the ERI Sub indicator Goalposts for calculating ERI Statistics across SACU countries Observed minimum Observed maximum Mean Standard deviation Skewness Rain 22.4 131.4 50.5 19.3 1.18 Temperature 12.4 23.0 19.1 3.28 -0.947
Method Estimator Dependent variable lnGDP_im F.E Pooled OLS OLS ln(Xij) R.E MLE ln(Xij) R.E GLS ln(Xij) F.E PPML (Xij) ln(Xij) -2.45* (0.00109) 1.03* (0.00118) -0.967** (0.852) 2.51* (0.00124) -11.3* (0.00139) -0.485* (0.0000579) -0.228* (0.0000776) 0.480 (0.785) 1.66 (0.777) -2.26 (0.780) -0.962 (1.15) -2.27 (1.13) -0.146 (0.206) -0.598 (0.264) 46 2162 -0.0695 (0.657) 1.10*** (0.644) -1.84** (0.808) -0.57 (1.05) -0.930 (0.992) -0.378** (0.180) -0.030 (0.202) -0.072 (0.884) 1.10 (0.854) -1.84*** (0.934) -0.569 ()1.34 -0.923 ()1.27 -0.380*** (0.223) -0.0319 (0.237) 45 2162 -5.87 (4.32) -6.17 (4.77) lnGDP_ex lnDistance -7.05 (4.94) 7.81 (5.74) -0.502 (0.251) -0.211 (0.279) 24 2162 lnGDPpc_im lnGDPpc_ex lnEnvR_im lnEnvR_ex R2 Number of obs. 5796 2162
Conclusion & Implications Paperinvestigated the impact of environment risk on bilateral livestock commodity trade within the SACU bloc. Ascertain another avenue which could help small-scale livestock farmers access investment funds. In the empirical analysis, the gravity model of trade was augmented with an environmental risk index. An increase in environmental risk has a negative impact on increase in environmental risk has a negative impact on livestock commodity trade livestock commodity trade. An Under-developed countries had higher environmental indices. Need for policies that help reduce the impact of environmental risks.
