Grain planting progress report : the potential benefits for the South African grain industry

Abstract

The grain and oil seed industry plays a major role in the South African economy; therefore, having access to market information is vital for this market to remain efficient and competitive. A shortage in market information causes many inefficiencies and uncertainties. Having market information allows the playing field to be level for all role players and reduces opportunities for manipulating prices. South Africa, just like most developing countries, needs to strengthen information flows, as well as institutions governing the grain and oil seed industry. In view of the major grain producing countries in the world and the amount of money and effort spent on releasing planting progress reports, the South Africa grain and oilseed sector should to take heed. This paper considers the importance of market information and how the South African grain and oil seed industry can benefit from that, grain planting progress reports are considered to be of importance as they fill a significant gap in the production season. Taking an institutional perspective into the economics of information, the study found that actors having little financial and social resources or political influence faced high costs in accessing information and that this prevents both market development and access to existing ones. The point of discussion is on weak information flows, as well as transaction costs that come with them, and the impact they have on prices and profitability. We therefore use New Institutional Economics to emphasise the importance of information in the market and the impact thereof in the absence of perfect information. The main underlying issue for imperfect information is that the lack of perfect and freely available information leads to risk and uncertainty in transactions. When trying to analyse the importance of information in the grain and oilseed industry, it was established that accuracy, value and market effect of information for public consumption were important. In particular, information communication technology was examined as a means of information dissemination in agriculture, especially in developing countries like South Africa. The study found that the major grain and oilseed producing countries that generate planting progress reports are the USA, Brazil, Argentina and Australia. The study looked at the methods used by these countries to compile such reports. Although they have varying methodologies, the key point is timely and frequent information which is readily available for public consumption. After analysing developments and methodologies globally, the focus shifted to South Africa where current information sources in the South African grain and oilseed industry, and the kind of information provided, were analysed. A pilot study was conducted in the summer grain production area of NWK Ltd to gain some insight and experience. The source of communication comprised mobile phones and farmers were able to respond on their progress, as well as receive feedback using the same communication media. Lastly in order to re-emphasis the benefits of a planting progress report, we review the impact of price volatility and how information in the market can help stabilise it.