Masters Degrees (Agricultural Economics)

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Browsing Masters Degrees (Agricultural Economics) by Author "Alemu, Z. G."

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    Factors affecting participation in mainstream cattle markets by small-scale cattle farmers in South Africa
    (University of the Free State, 2006-05) Montshwe, Bolokang Derrick; Jooste, A.; Alemu, Z. G.
    Even though livestock farming has been identified in the Integrated Sustainable Rural Development Strategy as the agricultural sub-sector with the most likely chance of improving household food security and addressing poverty alleviation in the small-scale farming areas of South Africa, the reality is that the small-scale cattle sector has not achieved its full potential despite many efforts through research and development programmes. Previous studies have mainly identified factors impeding participation of small-scale farmers in both informal and mainstream markets and the extent or degree at which participation is affected. The purpose of this study was to investigate the probability of small-scale cattle farmers participating in mainstream markets and measure the impact of change of selected variable on the probability to participate. This is a departure from previous research in that the study attempts to identify those factors that have the greatest probability to increase participation in mainstream markets by smallscale farmers. The study was conducted in three different areas, namely Hammanskraal, Ganyesa and Sterkspruit. The sampling technique used in Hammanskraal is the stratified random sampling technique. In Ganyesa all the identified farmers were interviewed. Since the number of small-scale farmers was unknown in the Sterkspruit area the snowball sampling technique was used. The total sample size is 150 small-scale cattle farmers. A logit model is used in this study. Since multicollinearity in the data was identified principle component (PC) analysis was used to deal with this problem. After PC’s were calculated and PCs with the smallest eigenvalues were eliminated, principle component regressions (PCR) were fitted using the standardized variables to improve the estimation power of the logistic regression model. Partial effects of the significant continuous variables (i.e. herd size, desired market distance, household size, lobola, dependents, theft, household assistance and mortality) on the probability to use mainstream markets are relatively small. However, partial effects for the significant discrete variables (i.e. market information, remittances, training and farming systems) are more significant. The increase in the probability to participate in mainstream markets if the initial conditions are addressed range between 0.3 and 0.6. Simulations with regard to a base group of households revealed training and access to information will have the largest positive impact on the probability of small-scale cattle farmers to market their cattle through mainstream cattle markets if initial conditions improve. Although desired distance to markets, herd size and household size have the potential to increase off-take to mainstream markets, its potential impact is less that training and access to information. The impact of remittances and lobola on the small-scale cattle sub-sector, risk behaviour and the informal market are areas that need further research.
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    Measuring market integration for apples on the South African fresh produce market : a threshold error correction model
    (University of the Free State, 2007-08-31) Uchezuba, David Ifeanyi; Alemu, Z. G.; Jooste, A.
    English: Apples constitute the bulk of deciduous fruit produced in South Africa, i.e. in 2000, apples made up the largest percentage of the deciduous fruit crop (43%). From 1991/92 to 2002/03 production averaged 574 850 tons per annum with a standard deviation of 43 922 tons. The average distribution of the apple crop between the local market, exports and processing is more or less even. Because of its potential lucrative nature much emphasis in the apple industry is afforded to exports, but relatively little is known about how price transmission takes place on the domestic fresh produce markets (FPMs). Moreover, it is increasingly recognized that the formulation of market-enhancing policies to increase the performance of the local market requires a better understanding of how the market functions. Aggregate market performance is better understood by studying the level of market integration that exists, which in turn is affected by transaction costs in the value chain. Hence, the primary objective of this study was to measure market integration for apples on the South African FPMs to determine the existence of long-run price relationships and spatial market linkages. Specific issues addressed in this study include, (i) determination of the effect of deregulation of the marketing of agricultural products in 1997 on average real market prices, price spread and volatility (risk), (ii) determination of how FPMs where apples are sold are linked and how prices are transmitted across these markets, (iii) determination of the threshold prices beyond which markets adjust and return to equilibrium, and (iv) establish the response of the FPMs to price shocks and how long it takes for shocks to be eliminated. The FPMs included in this study are Johannesburg, Cape Town, Tswhane, Bloemfontein, Port Elizabeth, Durban, Kimberley and Pietermaritzburg. The criteria for selecting the FPMs were based on net market positions (surplus or deficit area), geographical distribution, the volume of trade and the importance of the market to the national apple trade flow. The investigation revealed a statistically significant decline in real prices in six of the eight markets investigated, a statistically significant relation in prices (price spread) between the Johannesburg FPM and five other FPMs, as well as that the price spreads between these markets declined after deregulation, and that the variation in real apple prices declined for five of the eight markets after deregulation. Standard autoregressive (AR) and threshold autoregressive (TAR) error correction models were compared to determine whether transaction cost has significant effects in measuring market integration. Larger adjustment coefficients were found in the TAR model. This is an indication that price adjustments are faster in threshold autoregressive TAR models than in AR models. Also half-life deviations in the TAR model are much smaller than in the AR model. The TAR model requires less time for one-half of the deviation from equilibrium to be eliminated than the standard AR model. Therefore, it is better to use TAR models than AR models because TAR models give a more reliable result. In addition, the parameter estimates of the threshold vector error correction model were analyzed. The results show that bidirectional and unidirectional causality exist between Johannesburg FPM prices and other markets. Regime switching estimates to investigate market integration in the selected markets show that no persistent deviation from equilibrium existed for all but one market pair and no clear evidence was found to support improved market integration after market deregulation in 1997. A nonlinear impulse response function to investigate the impact of positive and negative price shocks in the Johannesburg FPM on other FPMs revealed that it takes about six to twelve months for positive and negative shocks to be completely eliminated in all the markets. Generally, the results obtained confirmed strong market integration in terms of apples for selected FPMs.
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    A study on the integration of potato markets in South Africa
    (University of the Free State, 2011-11) Du Preez, Leandré; Alemu, Z. G.; Grové, B.
    Potatoes are the most important vegetable product in South Africa and the third most important food crop in the world. Potatoes are planted in all the regions and sold on all of the Fresh Produce Markets of South Africa. The markets serve as the price setter for the industry and producers are not sure about the movement and the fairness of prices they receive. Marketing strategies are based on price information and producers cannot accurately determine their strategy if price information is incorrect or unavailable. The study therefore investigated the integration of potato markets in South Africa based on price data. The primary objective of the study is to analyse market integration within the potato industry of South Africa. The existence of price relationships and spatial linkages between markets are determined by the study. Market integration was determined by applying the Threshold Vector Error Correction Model (TVECM). The TVECM is used more often in recent literature and is methodologically stronger than some of its predecessors. The method allows for nonstationarity of variables and considers the possibility of non-linear and asymmetric type of variables. The pivotal role played by transaction costs are incorporated into the model. The study also tested whether a two or three regime model would best fit the data, instead of imposing a specific regime. The data used in the study is weekly data ranging from January 1999 to June 2009. The study was done on eight selected Fresh Produce Markets (FPM) namely Johannesburg (JHB), Pretoria (PTA), Bloemfontein (BFN), Kimberley (KBY), Durban (DBN), Cape Town (CTN), Pietermaritzburg (PMB) and Port Elizabeth (PE). The following results were obtained. First, on the statistical properties of the variables - all price variables are non stationary. Based on co-integration analyses long run relationships between all market pairs considered were found. The market pairs are thus co-integrated or integrated in the long run. Second, after results suggested non-linearity, decisions were made to test for the presence of market integration in the short run by fitting TVECM. A set of two and three regime TVECM were estimated. Overall, results indicated that in the short run, the markets are not integrated. In addition, results from regime switching showed no discernible pattern on the time of switches between regimes. In conclusion the results from the direction of causality test indicated a one directional flow with Johannesburg FPM being the main destination market. Overall, results attest to a prior expectation that Johannesburg is the leading FPM in South Africa. Markets are integrated in the long run but are not integrated in the short run.