Andre Jooste

Measuring the Price Volatility of Certain Field Crops in South Africa using the ARCH/GARCH Approach

Abstract The conditional volatility in the daily spot prices of the crops traded on the South African Futures Exchange (yellow maize, white maize, wheat, sunflower seed and soybeans) is determined. The volatility in the prices of white maize, yellow maize and sunflower seed have been found to vary over time, suggesting the use of the GARCH approach in these cases. Using the GARCH approach, the conditional standard deviation is the measure of volatility, and distinguishes between the predictable and unpredictable elements in the price process. This leaves only the stochastic component and is hence a more accurate measure of the actual risk associated with the price of the crop. The volatility in the prices of wheat and soybeans was found to be constant over time; hence the standard error of the ARIMA process was used as the measure of volatility in the prices of these two crops. When comparing the medians of the conditional standard deviations in the prices of white maize, yellow maize and sunflower seed to the constant volatilities of wheat and soybeans, the price of white maize was found to be the most volatile, followed by yellow maize, sunflower seed, soybeans, and wheat respectively. These results suggest that the more risk-averse farmers will more likely produce wheat, sunflower seed and to a lesser extent soybeans, while maize producers are expected to utilise forward pricing methods, especially put options, at a high level to manage the higher volatility.

Quantifying the impact of phytosanitary standards with specific reference to MRLs on the trade flow of South African avocados to the EU

Abstract In this study a gravity model was used to investigate the impact of country specific MRLs that are more stringent than the MRLs set by CODEX on avocado exports by South Africa to the EU with specific reference to Prochloraz. The results revealed that the more stringent Prochloraz MRLs indeed have an impact on avocado exports to the EU. The simulation results show that the revenue foregone due to the more stringent Prochloraz MRLs is US

Towards a broader understanding of South African consumer spending on meat

15.27 million. In relative terms this is significant, and should the Prochloraz MRLs be relaxed to the CODEX levels the contribution of the avocado industry to the gross domestic value of agricultural products would increase significantly. Furthermore, several studies have revealed the potentially negative impacts of abnormal levels of Prochloraz. The question arises why there are anomalies in the application of Prochloraz MRLs between countries and whether the CODEX MRL already account for these negative impacts. In depth analysis should be done with respect to the anomalies prevailing for Prochloraz MRLs to provide a proper scientific basis for applying them. Other recommendations are that much more attention should be given to the development of the national market for avocados and that other markets than the EU market should be explored for exports.

The influence of cowpea characteristics on cowpea prices in Senegal

Abstract This paper analyses meat consumption trends in South Africa. Despite the fact that aggregate per capita meat consumption remained relatively constant during the last 34 years, significant changes were observed in the per capita consumption among different meat categories. By applying Ordinary Least Squares (OLS) and the Johansen cointegration approach to a conventional demand function, significant changes in the contributions of economic and non-economic factors towards meat demand were identified over time. From the analysis it is apparent that non-economic factors play a greater role in determining meat consumption in South Africa.

The agricultural input elasticity of rural-urban migration in South Africa

Abstract In examining demand for a product it is useful to think of consumers not as purchasing the product, but as purchasing its characteristics that provide utility. Consequently, it is important to measure the specific characteristics that consumers perceive as providing them with utility. In this article a hedonic pricing model is used to investigate the influence of different cowpea characteristics on cowpea prices in Senegal. The results provide valuable information for research institutions, producers, and traders. Cowpea plant breeders should emphasise large grain size as the main characteristic since buyers are willing to pay a premium for this characteristic. This should translate into higher returns on R&D. There exist differences between markets in terms of consumer preferences for testa colour and texture. The result is that sorting and grading of cowpeas according to these characteristics should increase profits, as there would be fewer discounts for undesired characteristics. The importance of adequate storage is also emphasized to protect seeds against insect damage. Finally, it appears that prices in different markets are not equally responsive to changes in the supply of cowpeas. Higher returns could hence be realized through more efficient sequencing of sales.

Vector error correction modelling of Nigerian agricultural supply response

Abstract The pace of rural-urban migration relative to urban job creation is of particular relevance in relation to the level of urban unemployment and poverty in many developing countries. Faced with high levels of urban unemployment and other socio-economic problems governments in developing countries adopted several policies to ameliorate the situation. Since such policies were mainly urban biased in nature it not only failed in most cases but also in some instance exacerbated the situation by stimulating more rural-urban migration. Rural-urban migration occurs where there is economic disparity between rural and urban areas. Some economists therefore, argue that boosting agricultural productivity and/or income can reduce the incidence of economic problems partially posed by rural-urban migration. In this paper, an attempt is made, using a recursive equation system and a South African data set for the period 1965–2002, to measure the indirect agricultural input elasticity of rural-urban migration. The results indicate that narrowing the urban-rural income differentials can reduce the massive rural-urban migration and high urban unemployment in the country. It is furthermore shown that developing agricultural land and infrastructure and increasing fertilizer use can boost agricultural income, reduce rural-urban migration and is consistent with policies aimed at curbing urban unemployment.

Smallholders and livestock markets

Abstract Undue taxing of the agriculture sector could constitute a disincentive to agricultural production in most low-income African countries where agriculture is being taxed for industrial development. There is an argument that the high level of taxation of agriculture in favour of industrialization is in part due to the underestimation of the supply response of the agricultural sector. This study tests the theoretical hypotheses that only price, non-price and natural disincentives respectively pose problems for agricultural growth. Johansens approach to co-integration analysis was employed to test these hypotheses using the time-series data from the Central Bank of Nigeria (CBN) statistical database. The long-run price elasticity of supply is 0.13 and capital shift supply 18 per cent. The implication of this is that much more in-depth research is needed to identify those factors that affect supply and to describe the effect of factors that shift supply in response to price incentives. This could provide valuable information for government in the use of appropriate policy measures and variables.

Tariff and Tariff Rate Quota Liberalization in the South African Livestock Industry: Approaches to Welfare Measurement

Livestock marketing by smallholders in South Africa has to be seen against a background in which both history and tradition play important roles; these influences have had big influence on the keeping, utilisation and marketing of livestock by particularly black farmers, who constitute by far the larger proportion of smallholders in Sub-Saharan Africa, including South Africa.

THE EFFECT OF THE EXCHANGE RATE AND INTERNATIONAL FACTORS ON THE COMPETITIVE POSITION OF SOUTH AFRICAN WHEAT PRODUCERS / DIE EFFEK VAN DIE WISSELKOERS EN INTERNASIONALE FAKTORE OP DIE MEDEDINGENDHEIDSPOSISIE VAN SUID-AFRIKAANSE KORINGPRODUSENTE

Abstract The liberalization of the agricultural sector and phasing out of past protection mechanisms in South Africa saw the introduction of a process of tariff reform. Furthermore, a system of tariff rate quotas was introduced in compliance with WTO regulations. This study uses a partial equilibrium comparative static model to measure the welfare effects of further liberalization in the livestock industry of South Africa, particularly in meat products using four policy scenarios. The traditional method of welfare analyses using the CS and PS was applied, while the EV was used to integrate a well-behaved objective function. Although the CS and PS could have over-estimated welfare due to the fact that the demand system used in this study is non-linear, they still gave useful information sufficient to compare the impact of trade liberalization on consumers and producers of livestock products. Furthermore, the EV explains the income change necessary to attain the welfare level resulting from trade liberalization given the current prices. When expressed as a percentage of the real gross national income and real disposable income, the values are quite marginal. The results from both methods of welfare measurement suggest that it is worth considering the effects on producers if further trade liberalization is envisaged in the South African livestock industry.

The comparative advantage of selected long-term crops in Lesotho

The principle for local producers is to be competitive if the playing field is level. In the medium to longer term, it is in the consumers interest to protect local producers against imports, since locally produced wheat will probably be Competitive with imported wheat in the long run in view of the expected trends in world prices and exchange rates.