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27 September 2021 | Story Leonie Bolleurs | Photo Supplied
Dr Frikkie Maré is serving as one of the directors of the non-profit organisation, the Agri Relief Foundation (ARF).

The agricultural sector is used to facing events of abnormal impact, including floods, droughts, veld fires, and disease outbreaks. Even if it is possible to prepare against any of these risks by taking proper measures, for instance by having a farm emergency plan in place or by securing property properly, there are times when it is not possible or practical for the modern-day South African farmer to proactively manage all the risks they are facing.

It is in times like these that the newly established body, the Agri Relief Foundation (ARF), provides an invaluable service to the agricultural sector. 

Dr Frikkie Maré, Senior Lecturer in the Department of Agricultural Economics at the University of the Free State (UFS), is one of the directors of this non-profit organisation, which focuses on assisting agricultural producers in need. 

This initiative is the brainchild of a number of businesses in the agricultural sector.

He says although there are many institutions in South Africa assisting farmers, most of the current initiatives are geared towards large-scale disasters, such as severe droughts, floods, unpreventable pests and diseases, and veld fires that affect many producers.  

Benefiting the wider society

According to Dr Maré, the ARF will focus on helping individual agricultural producers who are in need; both financially and otherwise.  This may include elements such as the loss of grazing due to brown locust, assistance after a farm attack or murder to ensure the day-to-day running of the farm, and localised natural disasters such as floods, hail, severe cold, or fire.

The group of directors plays a key role in screening the applications for assistance and deciding, based on merit and the availability of resources, who they can assist.

Besides the direct benefit to the farmer, this initiative also adds value to the wider society. “When the sustainability of an agricultural producer is under threat, it also threatens the livelihoods of his/her workers and their families, the rural economy of the nearest town where they purchase production inputs and general groceries, as well as society at large, as less food and/or fibre will be produced.  The assistance of the ARF will therefore ripple out to a much larger level than only the agricultural producer,” explains Dr Maré. 

A learning experience

There is also a benefit for the university. In the classroom, Dr Maré will be able to share any knowledge he is gaining in this process with his students. “Agricultural Economics is fundamentally about ensuring the long-term sustainability of agricultural production through concepts, including but not limited to, production economics, natural resource economics, agricultural management, and marketing.  My involvement in the ARF will provide examples of what can go wrong in terms of primary production that threatens the sustainability of the enterprise and what can be done to assist,” he says. 

Any business or individual can contribute to this noble cause. Financial contributions as well as physical products such as transport, fuel, animal feed, and legal services are welcome. 

Dr Maré says they have already received contributions from companies such as Zoetis (animal health), which sponsor a part of their profit from certain products to the foundation on a continuous basis. Lavendula (animal feed) also sponsored the proceeds of a farmers’ information day.

News Archive

Producers to save thousands with routine marketing strategies, says UFS researcher
2014-09-01

 

Photo: en.wikipedia.org

Using derivative markets as a marketing strategy can be complicated for farmers. The producers tend to use high risk strategies which include the selling of the crop on the cash market after harvest; whilst the high market risks require innovative strategies including the use of futures and options as traded on the South African Futures Exchange (SAFEX).

Using these innovative strategies are mostly due to a lack of interest and knowledge of the market. The purpose of the research conducted by Dr Dirk Strydom and Manfred Venter from the Department of Agricultural Economics at the University of the Free State (UFS) is to examine whether the adoption of a basic routine strategy is better than adopting no strategy at all.

The research illustrates that by using a Stochastic Efficiency with Respect to a Function (SERF) and Cumulative Distribution Function (CDF) that the use of five basic routine marketing strategies can be more rewarding. These basic strategies are:
• Put (plant time)
• Twelve-segment pricing
• Three-segment pricing
• Put (pollination)(Critical Moment in production/marketing process), and
• Pricing during pollination phase.

These strategies can be adopted by farmers without an in-depth understanding of the market and market-signals. Farmers can save as much as R1.6 million per year on a 2000ha farm with an average yield.

The results obtained from the research illustrate that each strategy is different for each crop. Very important is that the hedging strategies are better than no hedging strategy at all.

This research can also be applicable to the procurement side of the supply chain.

Maize milling firms use complex procurement strategies to procure their raw materials, or sometimes no strategy at all. In this research, basic routine price hedging strategies were analysed as part of the procurement of white maize over a ten-year period ranging from 2002–2012. Part of the pricing strategies used to procure white maize over the period of ten years were a call and min/max strategy. These strategies were compared to the baseline spot market. The data was obtained from the Johannesburg Stock Exchange’s Agricultural Products Division better known as SAFEX.

The results obtained from the research prove that by using basic routine price-hedging strategies to procure white maize, it is more beneficial to do so than by procuring from the spot market (a difference of more than R100 mil).

Thus, it can be concluded that it is not always necessary to use a complex method of sourcing white maize through SAFEX, to be efficient. By implementing a basic routine price hedging strategy year on year it can be better than procuring from the spot market.

Understanding the Maize Maze by Dr Dirk Strydom and Manfred Venter (pdf) - The Dairy Mail


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