Modelling the relative comparative advantage of organic wheat production in the Western Cape

[摘要] ENGLISH ABSTRACT: After sixty years of state control, the agricultural sector in South Africa has been transformedto the so-called free dispensation, with the driving forces being market access and rules of theWTO. On the one hand, this increased the exposure of the sector, particularly at internationallevel where interest for South African produce developed. On the other hand, transformationinduced a considerable degree of price squeeze and risk in the production of certaincommodities including wheat.Notwithstanding, local wheat producers like any other farmers are generally price takers, andin some cases do not have a comparative advantage in what they produce. This is worsenedby policy distortions in product markets, although to a lesser extent than before. Thesedistortions are responsible for farmers to make decisions that are neither economicallyefficient nor optimal in a social sense.Therefore, the uncertain future of the wheat industry, particularly in the Western Cape,including the changing business environment, urges producers to adapt quickly if they wish tostay in business. Hence, the challenge for a farmer and agricultural support organisations is tofind solutions to these problems. One of the factors that can be looked into in findingsolutions is to look at the demand side of the equation by taking product differentiation andmarket identification into account. In other words, products that carries a specific character,and a niche market where these products attain higher prices are the main objectives of thisexercise.In looking at these options, it is necessary to first study the end consumer of these products.Looking at the local market first, there is a relatively small but growing market for high pricedniche products, but for the most part, local consumers are looking for low cost commoditytypeproducts. In many cases, South Africa is marginally competitive in these products and somust look at alternative markets. On the export market, on the other hand, consumers aregenerally more sophisticated and specific in the kind of food they demand, where they arelooking for quality and tracebility, and are willing to pay a premium which can be exploited.Therefore, the aim of this study is to determine whether wheat would have a comparativeadvantage if produced under organic management, as a system that have products with theseattributes. The study first evaluates the comparative advantage of the existing industry, theso-called conventional wheat, specifically looking at the policy environment around thiscommodity, as these are likely to affect the potential of organic wheat. The Policy Analysis Matrix technique is used to calculate various indicators of comparative advantage and toidentify the effects of policy measures with regard to wheat. The analysis used the availabledata for ten selected farming areas. On the other hand, organic wheat farming is not practisedin the Western Cape at present. As a result, expert assessment was used to provideinformation based on the reference method.As the study is the comparison of two systems, the results therefore indicates that some areasof the Western Cape do not have a comparative advantage in wheat production underconventional practices, which would not be the case if produced under organic management.The reasoning underlying this is complex, but mainly traced from high levels of input use thatcarries a distorting effect, partly because of tariffs on imported inputs, unlike organicproduction which is less subject to this effect. The net effect of the whole policy environmenthas a negative impact on producers including those of potential organic wheat, as somepolicies are likely to affect this potential industry. Consequently, it is recommended thatfarmers must evaluate their options by looking at systems that utilise less distorted inputs, andhence higher profits like organic farming.

[发布机构] Stellenbosch University