Maize marketing strategies : the trade-off between risk and profit for a Mpumalanga maize farm

Abstract

South Africa has become, after deregulation, part of the global village. This brought about many business opportunities, but with it came many challenges with respect to grain marketing. It is well-known facts that the marketing of grain has become quite a challenge in S.A. South African producers do not receive support from government as far as input subsidies and significant import tariffs are concerned and have to make sure that they stay ahead of rising input costs in order to produce maize on a profitable basis. It is therefore extremely important for any maize farmer in South Africa to make use of the best grain marketing strategies at his or her disposal. Choosing the best grain marketing strategy will not only assist the producers to receive the best price for their produce, but will also serve as a very effective risk mitigation strategy. The general objective of the study is to examine different marketing strategies and to determine the optimal maize marketing strategy for a representative farm located in the Mpumalanga Highveld for a specific season under volatile marketing and environmental conditions. A representative farm for the Mpumalanga Highveld is constructed, based on production data, budgeted financial statements, general financial management and the complete farm setup as obtained from a farmer study group located in the district of Middelburg, Mpumalanga Highveld, The most general maize marketing strategies available for the representative farm is identified and discussed as far as each of their advantages and disadvantages are concerned. The complete farm setup for the representative farm is used to develop a budgeting and maize marketing model. This is done in conjunction with three different scenarios, which cover the most frequent circumstances in which producers can find themselves. With the help of this model, the optimal marketing strategies are determined which yields the optimal profit and minimize price risk for the representative farm. Copyright