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CHANGING DIRECTION OF TRADE OF BUFFALO MEAT IN INDIA – AN APPLICATION OF MARKOV CHAIN ANALYSIS

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J.Shilpa Shree1, S. Sridhar2 and M. Kiran 3 1

Asst. Professor, Department of V&AHEE,Veterinary College, Hebbal, Bangalore 2

Captain, Equine breeding stud, Babugarh, India 3

Research Scholar, Department of V&AHEE, Veterinary College, Hebbal, Bangalore

Abstract

The livestock wealth of India is one of the highest in world. India is the world’s largest exporter of buffalo meat and accounts for 58 per cent of the world's buffalo population. Buffalo in India contributes about 30% of total meat production in the country. However despite this potential and growth, the sector is not well integrated. The present system of production and marketing of buffalo meat for domestic and export market is endowed with multifarious challenges and needs corrective measures at various levels. Keeping this in mind, the present study was undertaken to find out the pattern of trade and also changing direction of buffalo meat trade in India by markov chain analysis. The import of buffalo meat is nill. However, the export of buffalo meat is tremendously increasing from 1980. Now, India is best exporter of buffalo meat. From the transitional Probability Matrix, it was found that India could not retain its previous export of Buffalo meat to Vietnam Soc Rep and Egypt. India’s previous Buffalo meat export to the Malaysia market was retained to the level of 34 per cent during the current period. India’s previous Buffalo meat export to the Thailand market was retained to the level of 23 per cent during the current period. The remaining 77 per cent was diverted to other countries alone. India’s previous Buffalo meat export to the other countries market was retained to the level of 9 per cent during the current period. The remaining share was directed to Malaysia and Egypt. State Governments should accord more priority to the livestock sector: Meat exports also help in raising the standard of living of small and marginal farmers who rear buffalo in their small backyards, and are able to sell their uneconomical buffalo to supplement their income. Various actors in the value chain, such as buffalo farmers, transporters, butchers, packing staff (generally females), and loading labourers are employed directly and indirectly in the livestock sector.

Keywords: India, Trade, Buffalo meat, Markov Chain

I. INTRODUCTION

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Unlike cow slaughter, there is no social taboo in killing buffalo for meat. Besides about 3600 slaughter houses, there are live modern abattoirs and one integrated abattoir meat processing plant for slaughtering buffaloes for exports and domestic consumption. Indian buffalo meat exports have grown to record levels in the last two years, making India the fourth country in the world to export more than 1 million tons of bovine meat annually. Given its tremendous export growth, India is world’s largest beef (buffalo meat) exporter. The country has exported 1106.96 thousand MT of buffalo meat products to the world for the worth of Rs. 17,400.59 crores. Vietnam Social Republic, Malaysia, Thailand, Egypt Arab Republic, Saudi Arabia and Jordan are the major export destinations. In fact, it is buffalo meat which has done wonders and which would help India remain a top beef exporter. The country will continue to be the leading beef exporter this year as well despite slower growth in production and higher domestic consumption of this commodity.

Indian buffalo meat export provides tough competition to other exporters due to its competitive pricing and quality. According to APEDA, export of meat and its products increased to $ 3.29 billion in 2012-13 against $2.91 billion the previous year. The shipment of buffalo meat has almost tripled, since 2008 when India had exported 6.72 million tonnes. Indian exports have made inroads into West Asia, North Africa and South East Asia. A key exporter happens to be Brazil as buffalo meat is cheaper in this price sensitive market. On the other hand, domestic consumption is also likely to increase from 2.04 MT last year to 2.1 MT this year. The NPC values for bovine meat indicate a high export potential, but these have witnessed an increasing trend, especially after 1993, indicating erosion of its competitiveness. However, it still hovers around 0.50 and India has much leverage to expand its bovine meat export further, though its competitiveness has deteriorated dramatically in recent years. In addition to the competitive pricing of Indian buffalo meat, increasing efforts by the exporters towards addressing of quality and hygiene aspects have also supported the export growth of buffalo meat (4). Over years, the commodity composition of meat export depicted a highly skewed trend towards the bovine meat (6). Thus, a deeper understanding of the dynamics of trade performance of buffalo meat in India would contribute towards the development strategy of this sector.

II. MATERIALS AND METHODS

The data used in this study were collected from various secondary sources. Time series data for twenty year (1991 – 2011) on export and imports (quantity as well as in value terms) of various livestock products for the world and India were collected from Food and Agricultural Organization (FAO) of the United Nations, FAO trade statistics and FAO commodity Review and outlook. The data on top exporting and importing countries were collected from Agricultural and Processed food products Export Development Authority (APEDA), Ministry of Commerce and Industry, Government of India. The reference period for the analysis is from 2007-08 to 2012-13.

Tabular analysis – to analyse the pattern of export, import and balance of trade of buffalo meat in India.

Markov Chain Analysis – Transitional Probability Matrix

For finding out the changes in the structure of the trade in dairy products of India, Markov chain analysis was used. Markov analysis is an application of dynamic programming to the solution of a stochastic decision process that can be described by a finite number of states (2). A finite markov process is a stochastic process whereby the outcome of a given trial t (t = 1, 2... T) depends only on the outcome of the preceding trial (t-1) and this dependence is the same at all stages in the sequence of trials.

Consistent with this definition, the structural change in the trade in dairy products of India was examined by using the Markov chain approach. Central to Markov chain analysis is the

estimation of the transitional probability matrix P. The element Pij, of this matrix indicates the

probability that export will switch from category i to category j with the passage of time. The

diagonal element Pii measures the probability that the export share of ith country will be retained (5 &

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only on its previous exports and this dependence is the same among all periods. A process satisfying these conditions is called a first order stationary Markov chain. With these assumptions, the unknown transitional probabilities were computed using the following matrix notation.

Yj = Xj Pj + Uj

Where,

Yj = is a vector of observation reflecting the proportion of export of jth country in time t.

Xj = matrix of proportion of export of ith country in time t-1

Pj = vector of unknown transition parameters to be estimated and

Uj = a vector of random disturbances

The transitional probabilities Pij have the following properties.

0 ≤ Pij ≤ 1 𝑃𝑖𝑗 = 1

𝑛 𝑗 =1

To estimate the transitional probabilities (Pij ), the restricted least square estimator of the quadratic

programming model of the following form was employed. Minimize U’U = (Y-XP)’ (y-Xp) = Y’Y – 2P’X’Y + P’X’XP Subject to

R x P = e P ≥ 0

Since the objective function in equation is in quadratic form while constraints are in linear form, it is reduced to the following primal – dual programming problem.

Maximize {X’Y – (X’X) P}’ P – ‘e P’W ≤ 0 Subject to

R x P = e

R’ + (X’X) P – W = X’Y P, W > -0

Where,

R = An known coefficient matrix (I1, I2, I3, ………. Ir ) with each Ii an identity matrix.

e = column vector with all entries equal to one. W = A set of non – negative slack variables

P = A matrix of unknown transition parameters to be estimated.

III. RESULTS AND DISCUSSION

Pattern of export, import and balance of trade of buffalo meat in India:

In India, the pattern of export, import and balance of trade of buffalo meat are shown in table 1.The import of buffalo meat is nill. However, the export of buffalo meat is tremendously increasing from 1980. Now, India is best exporter of buffalo meat.

Table 1: Pattern of export, import and balance of trade of buffalo meat in India:

Export Import

Net trade 1991 81459 1 81458

1992 81614 0 81614

1993 101666 0 101666

1994 116138 0 116138

1995 159703 0 159703

1996 157574 0 157574

1997 176329 0 176329

1998 153956 0 153956

1999 167292 2 167290

2000 288027 0 288027

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Direction of Trade and Changing Pattern of buffalo meat trade in India:

The transitional probability matrices were presen

ted in table depicts a broad indication of the changes in the direction of trade of buffalo meat in India. The time period considered is for seven years (2006 – 07 to 2012 – 13).

The four major exporting countries for Buffalo meat taken for this analysis were Vietnam Soc Rep, Malaysia, Thailand, Egypt with the remaining exporting countries grouped as others. As could be seen from the table, the transition probability matrix indicated that India could not retain its previous export of Buffalo meat to Vietnam Soc Rep and Egypt during the study period. The entire share of Vietnam Soc Rep was directed to other countries (57 per cent) followed by Egypt (15 per cent), Malaysia (12 per cent) and Thailand (3 per cent). However, Vietnam Soc Rep has higher probability to gain 98 per cent of the market share of Egypt alone.

The entire share of Egypt was directed to Vietnam Soc Rep (98 per cent). However, Egypt has probability to gain 15 per cent and 6 per cent of the market share of Vietnam Soc Rep and other countries respectively.

India’s previous Buffalo meat export to the Malaysia market was retained to the level of 34 per cent during the current period. The remaining 66 per cent was diverted to Vietnam Soc Rep (36 per cent) and other countries (30 per cent). However, Malaysia has higher probability to gain Vietnam Soc Rep’s export market (0.12) and of other countries (0.01).

Transitional Probability Matrix for India’s Export of Buffalo Meat

Vietnam Soc

Rep Malaysia Thailand Egypt A Rp Others Vietnam

Soc Rep 0 0.115666 0.025854 0.153949 0.567724

Malaysia 0.36044 0.343551 0 0 0.29601

Thailand 0 0.003426 0.226481 0.000841 0.769253

Egypt A Rp 0.977585 0 0 0 0

Others 0 0.010905 0 0.063378 0.088031

India’s previous Buffalo meat export to the Thailand market was retained to the level of 23 per cent during the current period. The remaining 77 per cent was diverted to other countries alone. However, Thailand has probability to gain 3 per cent of the market share of Vietnam Soc Rep alone. The entire share of Egypt was directed to Vietnam Soc Rep (98 per cent) alone. India’s previous Buffalo meat export to the other countries market was retained to the level of 9 per cent during the current period. The remaining share was directed to Malaysia and Egypt. However, other countries has higher probability to gain Thailand’s export market (0.77), followed by Vietnam Soc Rep’s export market (0.57) and of Malaysia (0.30).

2002 297897 0 297897

2003 343817 0 343817

2004 306971 84 306887

2005 459937 0 459937

2006 494112 2 494110

2007 482925 2 482923

2008 460031 0 460031

2009 484689 0 484689

2010 654624 0 654624

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IV. CONCLUSION

The present study was undertaken to find out the pattern of trade and also changing direction of buffalo meat trade in India by markov chain analysis revealed that the export of buffalo meat is tremendously increasing from 1980. Now, India is best exporter of buffalo meat. India could not retain its previous export of Buffalo meat to Vietnam Soc Rep and Egypt. India’s previous Buffalo meat export to the Malaysia market was retained to the level of 34 per cent during the current period. India’s previous Buffalo meat export to the Thailand market was retained to the level of 23 per cent during the current period. The remaining 77 per cent was diverted to other countries alone. There is need for a sustainable buffalo production system in the country to meet the future demand of buffalo meat. Therefore priority should be given to implementation of a male buffalo calf rearing programme for the long-term benefit of the farmers, country and the trade. Although India ranks at the top in bovine inventory, the inventory of buffalo has been found to be declining in a few states. This indicates a growing shortage of buffalo meat. However, such a decline cannot be related to the export of buffalo meat from the country as there are no registered export units in these states. Secondly, slowdown in increase of population is not only due to slaughter but can also be due to urbanization and conversion of agricultural areas into housing/commercial/industrial land. For augmenting exports and assuring quality, developing a traceability model for Indian buffalo meat is very important. APEDA has laid down minimum requirements for construction of export oriented approved abattoirs. This requires identification of animals to be carried out as soon as the animal arrives at the slaughter house at the unloading area for slaughter. State Governments should accord more priority to the livestock sector: Meat exports also help in raising the standard of living of small and marginal farmers who rear buffalo in their small backyards, and are able to sell their uneconomical buffalo to supplement their income. Various actors in the value chain, such as buffalo farmers, transporters, butchers, packing staff (generally females), and loading labourers are employed directly and indirectly in the livestock sector.

BIBLIOGRAPHY

[1] APEDA. (2015). Export of agro and processed food products including meat and meat products. Agricultural and Processed Food Products Export Development Authority. Ministry of Commerce, Government of India

[2] Daniel (1962) The use of Markov process in measuring the changes in market structure, Journal of Farm Economics,

44 (1): 189 -199

[3] Food and Agriculture organization of the United Nations (FAO), FAO Trade year book, Rome and database.

[4] Kumar, A., S. Jee and C. Yadav (2012). Export of Buffalo meat from India: performance and prospects. Indian Journal of Animal Sciences,82(12): 1578 – 1583

[5] Sreenivasamoorthy, D. and K.V. Subramanyam (1999). Onion exports markets and their stability for increasing India’s exports: Markov chain approach. Agricultural Economics Research Review,12(2): 118 – 127

[6] Suresh A., B . Kavitaand K.R. Chaudhary (2012). India’s meat export: Structure, Composition and future prospects.

Indian Journalof AnimalSciences, 82(7): 749–756.

References

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