Characteristics of farmers in South Africa -- business structures to increase farmer's market power

An assessment of the characteristics of farmers in South Africa in order to identify best suited business structures to increase farmer's market power

By L. Terblanche and B.J Willemse

Paper presented to 2008 IAMA World Symposium, Monterey

Abstract

Farmers have lost control over the marketing function for the commodities they produce and this has led to a decrease in the producer's share in the price of the final product paid by consumers. If the smaller farming businesses were to work together as a unit, they will be able to regain some of the power that they have lost and will be able to negotiate better prices for their inputs and the product that they are producing. There are different debates surrounding businesses in South African agriculture. These debates are increasing, as more and more farmers realize that if they collaborate they can increase their market power and most probably be able to better protect and manage their own survival as a business. This can only be accomplished if the market power of all the participants is balanced. The aim of the study is to use the logit model to firstly identify factors that influence the decision of commercial farmers to use Farmer Controlled Businesses (FCB's) and the reasons that influences them not to use FCB's. Secondly, the factors that influence the quantities (%) of the product that the farmers market through FCB's will be analyzed. Lastly, the factors that influences grain producers and non-grain producers to sell their produce through FCB's will be analyzed to determine if they are the same. A binary logit model will be used. The results showed that a successful FCB should provide market information and financing as well as research in new technologies to their members. Profits will then following in the long run.

Available for download at http://dev.ifama.org/dispatch.asp?page=symposium_presentations_2008