Economic Tidbits

Price Discovery & Somalian Camel Markets

Price discovery in fed cattle markets is an ongoing concern among U.S. cattle producers. Concerns with price discovery in livestock markets, though, is not limited to the U.S. A recent article in the The Economist magazine reported the lack of price transparency in Somaliland camel markets is a growing concern too (Humponomics: Why camel traders are getting the hump, The Economist, May 13, 2021).

The magazine describes a marketplace and negotiation over prices for camels in a city in Somaliland:

“The city’s livestock market is a bustling and noisy place: goats bleat, camels bellow and sellers extol their animals’ constitutions. When it comes to reach a price, however, all is silent. The parties on each side of the trade slip an arm under a shawl. The buyer makes an offer by grabbing the sellers’ fingers. The number of fingers gripped and knuckles pressed determines the bid. If it is too low the seller maneuvers the hold. On and on they go, hands like human abacuses, until the deal is done.”

Camel brokers, who represent camel sellers, like the hidden, hands under the shawl, price negotiating system because it gives them an information edge over buyers regarding current prices. Economists refer to this information imbalance as asymmetric information—not all market participants have access to the same information. Because of asymmetric information, not all camel market participants are happy with the hands under the shawl negotiating system and want a more transparent system. Pressure to open the markets is an outgrowth of two trends. One, increased usage of mobile phones has allowed buyers to share pricing information. Second, female participation in the markets is creating pressure for a different system because Islamic law forbids non-related men and women from touching.

Concerns with price discovery in livestock markets come in many forms. In Somaliland, it’s camel markets. For the U.S., it’s fed cattle markets. While markedly different, it’s fascinating to see livestock markets across the globe struggling with the same issues, just in different forms.

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