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THE
GRAIN AND OILSEED INDUSTRY
OF SOUTH AFRICA – A JOURNEY THROUGH TIME
ႃႂ
with respect to their prices, while the agribusinesses acted only as agents for the
boards to receive, store and distribute grain, and pay the purchase price of the
grain to producers.
With the deregulation of grain marketing in 1996 the responsibility for marketing
shifted to the producers themselves virtually overnight, and as the control boards
in the regulated market had dealt with all the marketing activities with respect to
grain, agribusinesses and producers had little experience in the marketing of grain.
Producers generally did not have the knowledge to make pricing decisions and
initially they could not rely on the agribusinesses for this. Considerable uncertainty
about price movements therefore reigned initially among those who became
involved in the buying and selling of grain in the new market environment.
Since deregulation the prices of grain in South Africa were mainly affected by
factors like import and export parity, tariffs, net domestic demand, supply, stock
levels, crop estimates, weather conditions and exchange rates. The price stability
of the regulated market made way for prices that fluctuated enormously and over
which the producers had no control. The market did offer producers the oppor-
tunity to hedge their financial risks through the use of market instruments, but a
lack of expertise in this field created major challenges.
SINCE DEREGULATION PRODUCERS COULD NO LONGER
RELY ON GOVERNMENT AID AND FIXED PRICES,
SO ECONOMIES OF SCALE BECAME INCREASINGLY
IMPORTANT. IN THE CASE OF WHEAT PRODUCTION,
A CONSIDERABLE INCREASE IN PRODUCTIVITY WAS
OBSERVED, BUT AT THE SAME TIME THE AREA IN WHICH
WHEAT WAS CULTIVATED WAS REDUCED CONSIDERABLY
AND THE QUANTITY OF WHEAT IMPORTED RAPIDLY
INCREASED. BY 2007 ONLY ABOUT 632 000 HECTARES
IN SOUTH AFRICA WAS UNDER WHEAT, COMPARED TO
ABOUT 1 550 000 HA IN 1991.
This commentary about the new market-
ing system appeared in
Mielies/Maize
of
July 1995.