For decades commercial silos in South Africa was the only option in which maize could be delivered and sold. After deregulation in the late 1990s commercial silo owners came to face the challenge of alternative storage solutions and loss of market share. The reasons are determined for a shift from commercial storage to on-farm storage. The extent to which on-farm storage will change the current maize storage industry is discussed.
The study commences by describing the birth and rapid growth of maize production in South Africa. Soon after maize became a major role-player in the export industry, it was characterised by regulation. The rationale why the market was regulated and how it influenced grain storage is explained.
The deregulation process and the objectives of the new Marketing of Agricultural Products Act, No. 47 of 1996, are paraphrased. In the deregulated market, current and future, maize prices are determined by supply and demand. Incentives for storage emerged and cheaper substitutes with various other advantages began to propose alternative storage solutions to farmers. These concurrences of circumstances then lead to fragmentation of grain storage in South Africa.
As a relatively young free market, the maize value chain is described to illustrate the position of each role-player in relation to the silo owner. The new price determination factors, price movement rationale and the use of market instruments are subsequently explained. Naturally, a critical assessment of the main different storage solutions available for farmers, are investigated next.
Fragmentation is defined and discussed in terms of market equilibrium. A comparison is drawn between the South African and the Australian as well as the US maize storage industry.
The empirical research was conducted on two sample groups of farmers in the Free State. The first group is farmers that already make use of an on-farm storage facility. The second group is farmers that annually produce more than 5000 tons of maize and currently do not make use of an on-farm storage facility. Seven important reasons for an on-farm storage facility are determined in the literature study as well as a qualitative study that preceded the quantitative study. Respondents are asked to rank the reasons in order of, in their opinion, importance.
A generalized profile of a respondent in each sample group was compiled. Hereafter the outcome of the reasons ranked by both sample groups is discussed. It appeared that Flexible Marketing Option was the most important reason for farmers that already make use of on-farm storage. Farmers did not indicate that Handling and Storage costs are the most important reason why they would invest in an on-farm storage facility.
Correlations are drawn between groups and the significance of differences is determined. It is concluded that on-farm storage is sustainable and there will be an increase of the phenomenon over the next three years.
Recommendations are given for commercial silo owners to regain market share. Costs analyses and effective cost management along with the promotion that marketing options are just as flexible within commercial silos, as it is outside, are some of the recommendations made. / Thesis (MBA)--North-West University, Potchefstroom Campus, 2013.
| Identifer | oai:union.ndltd.org:NWUBOLOKA1/oai:dspace.nwu.ac.za:10394/9228 |
| Date | January 2012 |
| Creators | Van der Merwe, Mathys Johannes Nicolaas |
| Publisher | North-West University |
| Source Sets | North-West University |
| Language | English |
| Detected Language | English |
| Type | Thesis |
Page generated in 0.002 seconds