The factors that influence the price of sunflower in South Africa
Boshoff, Izak David
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Sunflower seed is the third most important field crop in South Africa after maize and wheat. During the period of regulated marketing (1980s - 1990s) the Oilseed Board controlled the majority of the oilseed industry in South Africa. Prices were determined by domestic demand and supply, as well as the export pool prices that were derived by the Oilseed Board. Prices were fixed for a particular production season and producers were faced with a single-channel marketing scheme. However, this situation changed with the introduction of the Marketing of Agricultural Products Act (No. 47 of 1996 as amended). This legislation led to the deregulation of the South African agricultural industry and the abolishment of the Marketing Boards. Since the deregulation of the oilseed industry in South Africa, the prices of sunflower products are determined under free market conditions (that is demand and supply). Sunflower products are formally traded on the Agricultural Products Division (APD) of the JSE Securities Exchange. This division is frequently referred to as the South African Futures Exchange (SAFEX). This dissertation aims to examine the structure of the South African sunflower price with the aid of various economic theories and econometric modeling techniques. Furthermore, the specific objective of this dissertation is to develop a series of South African sunflower price models to identify the factors that influence the price of sunflower in South Africa (the general objective of this dissertation). These models can accordingly be utilised to make definite projections of the price of sunflower in South Africa. Vector Auto-Regression Estimations, Vector Error Correction Models and First-Order Autoregressive Models are applied to monthly data (January 2000 - March 2007) to develop four different South African sunflower price models. The results of the different sunflower price models yielded a number of influential price factors that are categorised into macroeconomic, South African oilseed supply and demand, South African vegetable oil import and international oilcake/meal price factors. The macroeconomic factors that influence the price of sunflower in South Africa are the Brent crude oil price per barrel, and the Rand/US-Dollar exchange rate. The South African oilseed supply and demand factors comprise the North-West Province rainfall, and the closing stock of sunflower in South Africa. The South African vegetable oil import factors that influence the price of sunflower in South Africa include the sunflower import parity price quoted by SAFEX, and South Africa's 750ml cooking oil price. The international oilcake/meal price factors are the Argentinean soybean meal price and the Argentinean sunflower meal price. Although these sunflower price models are based on a South African specific case study, a number of generic shortcomings in the composition, significance and applicability of such models were identified during their development. Consequently, these shortcomings need to be considered and addressed in future agricultural price modeling studies.