Pieter R. Taljaard

THE DEMAND FOR MEAT IN SOUTH AFRICA: AN ALMOST IDEAL ESTIMATION

Abstract A Linear Approximated Almost Ideal Demand System (LA/AIDS), estimated in first differences, was used to anticipate the demand relations for meat (beef, chicken, pork and mutton) in South Africa from 1970–2000. Two tests for weak separability, including an F and Likelihood ratio version, failed to reject the null hypothesis of weak separability, confirming that the four meat products are separable, and should be modelled together. According to the Hausman exogeneity test, the expenditure term in the South African meat demand model is exogenous. As a result, a Restricted Seemingly Unrelated Regression (RSUR) was used to estimate the model, whereafter the parameters were used as to calculate compensated, uncompensated and expenditure elasticities.

Transaction costs and cattle farmers’ choice of marketing channel in North-Central Namibia

Abstract About 70 per cent of the Namibian population depends on agricultural activities for their livelihood. Moreover, agriculture remains an important sector in Namibia owing to the fact that its national economy is widely dependent on agricultural production. Cattle producers in the Northern Communal Areas (NCAs) have an option to market their cattle via the formal or informal market. Efforts have been made to encourage producers to market their cattle through the formal market; however, these proved to be futile as the strategy yielded limited improvements. In this study, a number of variables have been analysed to determine factors that influence cattle marketing decisions. Factors influencing the marketing decision on whether to sell or not sell through the formal market have been analyzed using the Probit model. Factors influencing the amount of cattle sold through the formal market, assuming that a producer uses the formal market to sell cattle, were analysed using the Truncated model. Testing the Tobit model against the alternative of a two-part model was done using Craggs model. Results from empirical research suggest that problems with transportation to MeatCo, marketing experience and the age of cattle producers are some of the factors that significantly influence the decision whether or not sell through the formal market. The accessibility of marketingrelated information, accessibility of new information technology, the age of respondents and a lack of improved productivity are some of the factors that influence the proportional number of cattle sold through the formal market. The results suggest that substantially more information is obtained by modelling cattle marketing behaviour as a dual decision-making framework instead of a single decision-making framework.

Towards a broader understanding of South African consumer spending on meat

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.

A Stochastic Budgeting Analysis of Three Alternative Scenarios to Convert from Beef-Cattle Farming to Game Ranching

Abstract The main objective of this paper is to evaluate the profitability and financial feasibility of three alternative scenarios to convert from beef-cattle farming to game ranching. The analyses acknowledge the importance of quantifying the probability of failure or success when making investment decisions. Risk is incorporated into a standard net present value analysis using risk simulation. De-trended historical auction prices of live game and on-the-hoof prices of weaner cattle were used to quantify price variability. The stochastic net present value analyses indicate that game ranching is more profitable than cattle farming. Although an investment in a limited number of common game species is financially feasible, the cash flow analysis indicates a decreasing probability of making more money with game when annual cash flows are compared to those generated by means of cattle farming. Both the high-value game species scenarios are financially unfeasible during the first five years. These infeasibilities stem from a high probability of not covering instalments to finance game purchases, the extent to which these instalments are not covered, and the high probability of shortfalls in consecutive years.

Choosing between the AIDS and Rotterdam models: A meat demand analysis case study

Abstract Due to the inability of economic theory to choose ex ante between the Almost Ideal Demand System (AIDS) and the Rotterdam model, a non-nested test was used. The results of the non-nested test points to the Linearized-AIDS model applied to 31 years of meat consumption data in South Africa. When comparing the estimated demand relations of the two models, the LA/AIDS model also proved to be a better fit for South African meat demand.

Segmenting food consumption in the Free State province of South Africa

ABSTRACT In this paper the nature of diversity that exists with regard to food consumption in the Free State Province is investigated. Furthermore, this paper also investigates the factors (quality attributes and household characteristics) differentiating these market segments from one another. Four separate steps were followed in an integrated manner in the investigation. Firstly, a representative sample was drawn for the Free State Province food consumers. Households are then segmented into smaller submarkets. The second step involved the use of principal component analysis to correct for the strong and prevalent underlying structure with respect to household preferences. In the final step, a binary logit model was applied to analyse the determinants of the market segments’ food consumption. Five market segments are prevalent in the Free State Province, namely: Cluster 1 (34.7%) – inferior-product consumers; Cluster 2 (23.6%) – at-home (basics) consumers; Cluster 3 (26.6%) – balanced consumers; Cluster 4 (12.3%) – value-added-oriented consumers, and Cluster 5 (2.6%) – high-frequency consumers (broad product range). The final logit model that was applied consisted broadly of economic and non-economic variables. The results show that significant differences prevail amongst the five market segments, for both economic and non-economic variables included in the model. Producers, marketers and other participants in the food value chain can use this as a basis from which appropriate marketing strategies could be developed, formalised and implemented.

The impact of maize-based ethanol production on the competitiveness of the South African animal feed industry

Abstract Over the past few years the world has witnessed substantial developments in the global production and the production capacity of ethanol. This tremendous growth in the industry is mainly driven by the following: petroleum prices, the reliability of traditional crude oil exporters along with political motives, adverse pollution effects and more specifically, emission gases from fossil fuels. Together with this growth, various researchers locally and globally have focused on ethanol production, but little work has been done on the economic impact that ethanol production will have on the animal feed industry. In order to simulate the results, the two main scenarios were analysed using two different models – namely, the BFAP model and the APR model. By applying the BFAP model to these scenarios, the equilibrium prices of animal feed raw materials were simulated for the year 2015. The APR model was then applied to these prices in order to evaluate the impact of ethanol production on the animal feed industry. Two main scenarios are constructed with four combinations; the main variables in the scenarios are the oil price and the blending ratios of biofuel. The results revealed that there is no significant effect on the animal feed industry. Various raw materials are affected, but only by small percentages. The only raw material that shows any significant change is lucerne, with a 20 per cent decrease in consumption. The greatest effect is the replacement of imported protein raw materials by DDGS (dried distillers grains with solubles). In terms of the animal feed costs, there was only a 2 per cent decrease with the introduction of ethanol production. Under a scenario of high blending ratios and oil prices, the yellow maize price increases by R169/ton and the soya oilcake price decreases by R347/ton.

Ethanol blending policies and the South African animal feed industry

ABSTRACT Ethanol production in South Africa is on the brink of becoming a reality. Government policy is currently one of the major constraints. In 2006, a proposed industry strategy was drafted. One of the main topics in this draft is the proposed blending percentages, namely, 8 per cent for bio-diesel and 10 per cent for ethanol. This would affect the South African animal feed industry, because Dried Distillers Grain with Solubles (DDGS) is a by-product of ethanol production from maize. The effects can be seen by applying the Agricultural Products Requirement (APR) minimum feed cost formulation model. According to the APR model, the total cost of animal feeds would decline at various blending percentages. Consumption of protein-rich raw materials declined most markedly at a 10 per cent blending of ethanol. These raw materials are mostly oil cake, which is currently imported from various countries. Some animals used more DDGS than others in their diets. According to this study, broilers used the most DDGS.