by Wessel Lemmer

issues around shortage of grain

Food security is still a major concern in SA

maize.jpg

A fair and free market environment is dependent on ideally spoken and complete marketing information accessible to every role-player in the value chain. It is further said that the best cure for high prices is actually high prices because the latter signals to producers to plant more.

Other information on future supply and demand may impact positively on food security because demand rationing and higher prices may prevent export of goods such as maize.

Thereby, total shortages and prices near import parity price levels at marketing year-end are prevented. In this article, we identify some possible barriers which may increase food insecurity and share some recommendations to evaluate and consider for policy intervention or voluntarily solutions by public/private sector collaboration.

Export sales information and domestic maize supply requirements

Buyers and sellers use supply and demand information to better determine the values of commodities in the marketplace.

Unbiased information levels the playing field, reduces price volatility and provides a consistent benchmark for market participants. Therefore, by supplying estimates of future supply and demand, private analysts have a common starting point and benchmark. Prices may react on these monthly estimates and signal to traders to export less or for producers to produce more.

The forecasts of supply and demand provide a starting point for public policy analysis, tariff policy assessments, agro-industrial development and food prices.

For instance, in the United States it is compulsory to declare anticipated export sales exceeding 100 000 tonnes at a time. This was necessary to prevent the recurrence of the ‘grain robbery’ by Russia.

Professor Matthew Roberts identified in his report to the National Agricultural Marketing Council in 2009, titled “The Existence and Use of Location Differentials in SAFEX Cash Market Settlement” that information on the South African grain and oilseeds markets is lacking. The planned supply and demand estimates committee may fill this important gap in the availability of market information.

The outcome of the evaluation of the competitive commission of this initiative and effective participation by industry in submitting the required information to the committee will determine the sustainability of this committee.

The grains Interagency Commodity Estimates Committees of the World Agricultural Outlook Board and the United States Department of Agriculture is publishing the well-known World Agricultural Supply and Demand Estimates reports and is the counterpart of this envisaged and long overdue committee within the South African marketplace.

 

 

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