The Gao region located in the northeastern part of Mali was the largest producer of both large and small ruminants in the country before the drought of 1972-1974. Since then, particular trends have been observed in livestock production: (a) small ruminant herds almost reached their pre-drought level in 1976, whereas cattle herds were at 23 percent of their pre-drought level; (b) in 1976-1977, local consumption of small ruminants attained their highest level of the 1970's, whereas cattle consumption decreased at least by a factor of four; and (c) exports of sheep and goats have increased after the drought, while cattle exports are almost nil. These trends suggest that herders have shifted from cattle to sheep and goat production at least during the post-drought period. The main objective of this paper is to analyze the economic reasons for the shift to small ruminant production. It consists of comparing costs and returns of producing cattle, and sheep and goats on one square kilometer of range typical of the Gao region. The study also analyzes the prospects of small ruminants in Gao, and identifies the possible constraints to their expansion.