Doctoral Degrees (Agricultural Economics)

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Browsing Doctoral Degrees (Agricultural Economics) by Advisor "Jooste, A."

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    Analysis and quantification of the South African red meat value chain
    (University of the Free State, 2011-05) Spies, David Cornelius; Jooste, A.; Taljaard, P. R.
    Given the natural resource base of South Africa, livestock production is one of the most important farming practices in the country. Of the approximately 80 % of the land surface being utilised for agriculture, almost 70 % is mainly suitable for raising livestock. The South African red meat sector contributed 14.8 % to the total gross value of agricultural production during the 2008/2009 season with cattle being the main contributor at 10.1 % while sheep contributed 2.5 % during the same period (DAFF 2010). The long-term average contribution of the red meat industry to the total gross value of agriculture production (from 1996/1997 to 2008/2009) accounted for 13.2 % and that of beef 9.4 % and sheep 2.4 % during the same period (DAFF 2010). The South African primary red meat sub-sector is unique due to the dualistic nature of the country’s agricultural situation. There is a clear distinction between the commercial (formal) sector of the industry and the non-commercial (informal) sector. Within the ambit of the above the South African red meat sector also has to compete at a global level. For the South African red meat industry to be on par and potentially become a leader (at least in the Southern African region) it is necessary to understand the red meat value chain in detail in a holistic manner to (i) guide decision making in the public and private sector domains, (ii) identify challenges that the industry faces that impedes on its efficient functioning and (iii) create a foundation for the better understanding of the dynamic forces within the industry to allow stakeholders to internalise it in order for them to position themselves so that they can increase their performance at each segment of the industry to the benefit of the entire industry. Merely providing a descriptive profile of a particular industry is not sufficient any more within a deregulated and liberalised environment. In order to make any normative judgments regarding the performance of an industry, an in depth value chain analysis is needed. This is what this study is set out to achieve for the large (cattle/beef) and small stock (sheep/mutton-lamb) subsectors. The broader industry was investigated through interviews with different stakeholders in the red meat value chain. The analysis on the value chain in general shows that the South African cattle and sheep industries have been growing in nominal terms when considering their contribution towards the total gross value of agricultural production. However, the percentage contribution towards total gross value of agricultural production in South Africa of these two sectors has remained relatively constant during the short term (cattle at 10 % and sheep at 2 %). Critical variables that affect the performance in the feedlot industry are weaner and feed prices, as well as the price they receive in the market. The performance at primary processor level is directly linked to the price of offal, which is highly variable on a geographical level as well as seasonal. The performance of the retail sector is highly dependent on their ability to cater for specific consumers in specific geographical areas, while seasonal demand also determines purchasing and pricing patterns. This variability in prices as well as the transmission thereof through the red meat value chain is a big concern in the industry. Price transmission was therefore investigated using time series data on primary producer- and derived retailer prices data from September 1999 to December 2008. The following methodological approaches were applied, namely the Engle and Granger cointegration test as well as threshold autoregressive models. The Granger causality test was applied to analyse causality. Asymmetry in price transmission (APT) was found in both the beef and lamb value chains, indicating inefficiencies within the chain. Causality in the case of beef ran both ways i.e. from producer level to retail level and vice versa depending on supply conditions while in the case of lamb a change in price at producer level “causes” changes at retail level. APT is not uncommon, especially in agricultural markets and a number of reasons can cause APT in a value chain, however, in the case of the South African red meat industry a few contributors to APT was identified namely; asymmetry in information flow, menu cost and inventory cost. The red meat value chain in the Free State province was investigated by using a value chain methodology that was derived from different approaches to value chain analysis. Primary data was captured by means of personal interviews. A total of 143 commercial producers were surveyed (i.e. 19 % of the total of 745 producers that made up the original producer database used). The analysis revealed the following important aspects, namely (i) 60 % of total income generated by commercial farmers is from livestock activities, (ii) productivity is high in the commercial sector with calving- and lambing percentages averaging 80 % and 93 % for the cattle and sheep sub-sectors respectively, while the smallholder sector only averaged 30 % and 13 % for cattle and sheep respectively, (iii) older animals within the commercial beef sub-sector are mainly marketed to primary processors while younger animals are marketed to the feedlot industry while the majority of animals in the sheep sub-sector are marketed to the primary processing industry, (iv) market access in the smallholder sector is still limited to regional auctions, the informal market and to lesser extent direct sales to abattoirs, and (v) the main constraining factors in the smallholder sector is the lack of proper infrastructure which makes managing practices difficult. One major concern within the industry is animal losses, i.e. 44 % of sheep losses in the FS was due to predation. The processor industry in the FS province is highly integrated, especially in terms of primary processors/abattoirs and butcheries. Abattoirs are an important marketing alternative, especially in the rural parts of the FS province. All the role-players in the FS cattle and sheep value chains identified the variability in live animal/meat prices as their main constraint. Increasing the productivity of the producers in the smallholder sector should be a major industry objective. This objective should start with the improvement of infrastructure, education of extension officers and simplified and easier access to credit. Given the methodology developed, and the results of the study, it is strongly suggested that the methodology be applied to the value chains of the remaining red meat producing regions in South Africa. This will provide a benchmarking platform for the red meat value chain in the country. This methodology should also be re-applied regularly (every 2 to 3 years) to keep the information up to date and to provide the means by which the industry can measure change in the industry. This will be critical from a private and public sector point of view.
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    ItemOpen Access
    Farm-level resource use and output supply response: a Free State case study
    (University of the Free State, 2006-11) Olubode-Awosola, Olukunle Olufemi; Van Schalkwyk, H. D.; Jooste, A.
    Abstract not available
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    The impacts of multilateral and bilateral trade agreements on agriculture trade in SACU
    (University of the Free State, 2011-12) Mokoena, Madime Reuben; Jooste, A.; Alemu, Z. G.
    International markets for agricultural products were characterised by,. amongst others, quantitative restrictions, tariff-based protection, border protection, non-tariff barriers, ete before 1995. Likewise, agricultural sector in South Africa (SA) was also faced by similar trade distorting measures during the post-apartheid era. In response to globalisation challenges, SA committed to move from protective to liberal trade regime in the agricultural sector, as witnessed by its trade diplomacy engagements with the international community in the context of multilateral, bilateral and/or regional approaches. At the multilateral level, SA has successfully implemented its commitments as negotiated in terms of the Agreement on Agriculture (AoA) during the Uruguay Round (UR) of General Agreement on Tariffs and Trade (GATT) negotiations that gave birth to the World Trade Organization (WTO). At the bilateral level SA 'has signed a Preferential Trade Agreement (PTA) with the European Union (EU) called the Trade, Development and Co-operation Agreement (TDCA) (better known as the EU-SA TDCA and includes a Free Trade Agreement). At the regional level, the Southern African Customs Union (SACU) member states including SA have signed a Protocol on Trade or a Regional Trade Agreement (RTA) with the non-SACU countries of the Southern African Development Community (SADC). The main objective of the study was to measure the impact of trade agreements on the agricultural trade between SA and its trading partners. A gravity model using panel data was employed to analyze the ex-post impacts of the implementation of the trade treatments, i.e. WTO AaA, EU-SA TDCA and SADC Trade Protocol on agricultural trade flows between SA and its agricultural trading partners. Various statistical tests were undertaken to select the suitable models for the datasets of total agricultural and selected agricultural products trade flows between SA and its agricultural trading partners. After the statistical tests were undertaken, 189 feasible models in total were selected, of which . 161 were dynamic models and 28 were static models. Furthermore, 152 Fixed Effects (FE), 2 Random Effects (RE) and 7 pooled Ordinary Least Squares (OLS) estimators were found to be efficient and suitable for the dynamic models; and 14 FE and 14 RE estimators were found to be efficient and suitable for the static models. The highest number of selected dynamic models suggested that passed trade is the predictor for current trade. The per capita ODPs of SA and of its trading partners, the real effective exchange rates and distance have also played a significant and expected role in influencing agricultural trade flows between SA and its agricultural trading partners. The results of the study have indicated that agricultural trade flows between SA and its agricultural trade partners have responded positively to the implementation of WTO AaA. The implementation of EU-SA TDCA and SADC Trade Protocol during the first five years (for the period 2000 - 2004) have not delivered the expected results, as the majority of agricultural trade flows between SA and EU countries as well as between SA and SADC countries were not affected and some of the agricultural trade flows between SA and EU countries as well as between SA and SADC countries were negatively affected. While the majority of agricultural trade flows between SA and EU countries as well as between SA and SADC countries were still not affected during the second five-year term (for the period 2005 - 2009), there were some improvements due to the significant positive effects of the EU-SA TDCA implementation on three agricultural trade flows (i.e. total agricultural trade, total cut flowers trade and total preserved fruits and nuts trade) as well as the significant positive effects of the SADC Trade Protocol implementation on four agricultural trade flows (i.e. total agricultural exports, total agricultural trade, total cut flowers trade and total fruits and vegetable juices trade). However, the number of agricultural trade flows between SA and ROW countries that have improved significantly for both periods were more than those of the EU and SADC countries, even though ROW countries did not have a trade agreement with SA. The implementation of the EU-SA TDCA and SADC Trade Protocol have created room for potential increases of all the agricultural trade flows between SA and EU countries as well as between SA and SADC countries for both periods. However, some of these potential increases for the period 2000 - 2004 were diverted to the other markets. On average, during the implementation of the EU-SA TDCA for the period 2000 - 2004, about 0.44% of agricultural exports, 0.96% of cut flowers exports and 0.77% of wine exports from SA destined for EU were diverted to other markets Furthermore, about 2.01% of SA's wine imports that were supposed to have been soureed from the EU countries came from SA's other wine trading partners; as well as the diversion of about 0.73% of total wine trade from the SA and EU market to either SA and other wine trading partner market or EU and other wine trading partner market. Similarly, the implementation of the SADC Trade Protocol led to diversion of agricultural exports (about 0.43%), cut flowers exports (about 0.93%), total cut flowers trade (about 0.92%), wine exports (about 0.73%), wine imports (about 1.45%) and total wine trade (about 0.35%) during the same period. \ With regard to the implementation of the EU-SA TDCA and SADC Trade Protocol during the period 2005 - 2009, there was no proof of trade diversion for all agricultural trade flows, except that the was a trade creation for some of the agricultural trade flows between SA and EU countries as well as between SA and SADC countries. In the case of the EU-SA TDCA, there was trade creation on total agricultural exports, total agricultural trade, total preserved fruits and nuts trade and total wine trade. In the case of the SADC Trade Protocol, there was trade creation on total agricultural trade, cut flowers exports and preserved fruits and nuts exports. In conclusion, these findings have clearly shown that tariff reductions alone are not panacea to improve agricultural trade between SA and its major trading partners given the fact that EU-SA TDCA and SADC Trade Protocol were mainly characterized by tariff phase down schedules.
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    Investigation of key aspects for the successful marketing of cowpeas in Senegal
    (University of the Free State, 2004-08) Faye, Mbene Dieye; Jooste, A.; Fulton, J.
    Due to the lack of information on the factors that affect the marketing of cowpeas in Senegal, this study investigates key aspects for the successful marketing of cowpeas in Senegal. The contribution this study makes lies in the information it generates to empower role-players in the cowpea value chain to better understand (i) the demand relations of cowpeas in Senegal, (ii) the information needs of role-players and the extent to which markets are integrated, and (iii) for which characteristics of cowpea consumers are willing to pay premiums. An Almost Ideal Demand System (AIDS) model is applied to one period cross sectional data to estimate demand relations of cowpea’s in Senegal. The own price elasticity of cowpea is -1.23 while its expenditure elasticity is 0.97 showing that cowpea is a normal necessity. A sample of 443 respondents was taken to determine the information needs of different role-players in the cowpea supply chain. Availability of price information on local and export markets are deemed vitally important by all role players. Information pertaining to quantities supplied and demanded, and buyers’ preferences are not regarded by all role-players as equally important. The most appropriate mode to dissemination cowpea related information should depend on the accessibility of a particular mode by role-players. Bivariate correlation coefficients, co-integration tests, Granger Causality tests and Ravallion’s model are used to investigate level of market integration. The results show that cowpea markets as a whole are not integrated. This is not a surprising result since it can be linked to the general lack of market information. The influence of cowpea characteristics on cowpea prices is analyzed with a hedonic pricing model. The results show that large grain size and sugar contents are characteristics for which consumers are willing to pay premiums in all markets. The implication of the results of this study has several dimensions, i.e. (i) role-players in the cowpea supply chain now has information to guide pricing strategies, (ii) changes in expenditures on cowpeas can be properly discounted in marketing strategies, (iii) interventions can be designed to address the needs of information users and to address the non-integrated nature of cowpeas markets, and (iv) research programs and role-players should focus their research and marketing activities on those characteristics for which consumers are willing to pay premiums.
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    Measuring asymmetric price and volatililty spillover in the South African poultry market
    (University of the Free State, 2010-09) Uchezuba, David Ifeanyi; Jooste, A.; Willemse, B. J.
    Over the last decade South Africa experienced two events during which food prices increased significantly. The periods of high food prices were also characterised by a high degree of volatility in prices. The result of the aforementioned events were that food security in South Africa was threatened, but at the same time evidence emerged that due to the current market structure in the agricultural industry certain role players used their market power to manipulate food prices. In an effort to better understand pricing behaviour in the food industry it is necessary to investigate the nature of price transmission in different agro-food chains. It is furthermore important to understand the nature of price volatility and the degree to which such volatility spillover from one level of a value chain to the next. The primary objective of this study is to measure asymmetric price and volatility spillover in the broiler value chain. The poultry (broiler) industry was chosen as a case study because there is an increasing demand for broiler meat in South Africa, culminating in increased per capita consumption compared to other meat categories such as the red meats. It is estimated that the per capita consumption of broiler meat increased steadily from 2001 to 2009. The sector is one of largest and fastest growing agricultural sectors in the country, contributing significantly to the total gross production value of agriculture. The specific issues addressed in measuring asymmetric price and volatility spillover in the broiler value chain includes: (i) the identification of the direction of flow of information (causality) between producers and retailers, (ii) examining the degree of asymmetric price transmission across the farm-retail value chain, (iii) quantifying volatility and volatility spillover across farm and retail prices, and (iv) investigating volatility spillover from feed materials to farm and retail market prices. The data used for this study include farm and retail poultry prices, as well as the daily nearmarket monthly spot prices for yellow maize, sunflower seed and soybeans. Two types of adjustment models, namely the threshold autoregressive (TAR) and momentum threshold autoregressive (M-TAR) models were used to investigate asymmetry in farm-retail market prices, whereas the exponential generalised autoregressive conditional heteroskedasticity (EGARCH) model was used to measure the price volatility and the volatility spillover effect between retail and farm prices and between these prices and poultry feed ingredients (yellow maize, soybean and sunflower oilseed). The result obtained with the M-TAR model shows that the relationship between farm and retail prices is asymmetric. The retail price was found to respond asymmetrically to both positive and negative shocks arising from changes in producer prices, but the response is greater when the shocks are negative, i.e. when the producer price rises to lower marketing margins in the value chain. The sizes of the adjustment parameters in the farm-retail combination reveal that retail prices do not respond to shocks completely and instantaneously, but respond within a distributed time lag. The results indicate that within one month, the retail prices adjust so as to eliminate approximate 2.8 % of a unit-negative change in the deviation from the equilibrium relationship caused by changes in producer prices. This implies that the retailers must increase their marketing margin by 2.8% in order to respond completely to a unit-negative change in farm prices. The results show that farm price granger cause retail price, implying that retailers depend on what happens at the farm level in order to form their market expectations. The results obtained with the M-TAR error correction model were to a great extent consistent with the results obtained with the EGARCH model. For instance, results from the volatility model show that the magnitude of volatility in the retail and farm prices for the periods 2000M1 to 2008M8 is 1.8% and 2.8%, respectively. The volatility in the farm price was found to approximate the volatility implied by the adjustment shocks in the farm-retail price relationship investigated with the M-TAR error correction model. The results of the asymmetric volatility measurement show that there is significant asymmetric volatility spillover from the farm to the retail market implying that the response to rising prices differs from the response to a price decline. This relationship was also observed with the asymmetric price transmission model. An investigation into the impact of the prices of the major broiler feed materials, namely yellow maize, sunflower and soybean, shows that there is a volatility spillover from the yellow maize price to farm and retail prices. This implies that any change in the price of yellow maize will have a significant impact on the retail and farm prices. Market influence also flows from the sunflower oilcake price to the retail market price. The presence of an asymmetric relationship between farm and retail prices signifies the existence of concentration and market power. In a situation like this, tighter anti-competition laws will discourage anti-competitive behaviours. It will be worthwhile to increase access to agricultural information systems amongst the role players in order to reduce information bottlenecks in the vertical market system.