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PR - Evaluation Of Basic White Maize Pricing Strategies Vs Spot Market Pricing Strategies (p467-476)

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  • Strydom, D.B.
  • Grové, B.
  • Henning, J.
  • Willemse, B.J.

Abstract

The use of modern marketing strategies to minimize risk exposure is not a widely adopted practice amongst maize producers. 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 South African Futures Exchange (SAFEX). This is mostly due to a lack of interest and knowledge of the market. The purpose of the study is to examine whether the adoption of a basic routine strategy is better than adopting no strategy at all. The study illustrate that by using a Stochastic Efficiency with Respect to a Function (SERF) and Cumulative Distribution Function (CDF) that the use of five basic strategies namely a Put (plant time)-, Twelve-segment-, Three-segment-, Put (pollination) and Sell after pollination can be more rewarding. These strategies can be adopted by farmers without an in-depth understanding of the market and market-signals. The results obtained from the study illustrate that producers who tend to be more risk neutral would prefer using the Twelve-segment- or Spot-strategy whilst a risk averse producer would prefer the Three-segment, Feb-Put or Dec-Put strategy. It also indicates that no strategy can be labelled as the all-time best and that the choice between strategies depends on the risk aversion of the producer.

Suggested Citation

  • Strydom, D.B. & Grové, B. & Henning, J. & Willemse, B.J., 2011. "PR - Evaluation Of Basic White Maize Pricing Strategies Vs Spot Market Pricing Strategies (p467-476)," 18th Congress, Methven, New Zealand, 2011 345598, International Farm Management Association.
    • Handle: RePEc:ags:ifma11:345598
    DOI: 10.22004/ag.econ.345598
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    References listed on IDEAS

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    1. Philip Garcia, 2004. "A selected review of agricultural commodity futures and options markets," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 31(3), pages 235-272, September.
    2. Jordaan, Henry & Grove, Bennie & Jooste, Andre & Alemu, A.G., 2007. "Measuring the Price Volatility of Certain Field Crops in South Africa using the ARCH/GARCH Approach," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 46(3), pages 1-17, September.
    3. Jordaan, Henry & Grove, Bennie, 2007. "Factors Affecting Maize Producers Adoption of Forward Pricing in Price Risk Management: The Case of Vaalharts," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 46(4), pages 1-18, December.
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    Marketing; Crop Production/Industries;

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