Factors affecting the hedging decision of farmers : the case of maize farmers in Gauteng province

[摘要] ENGLISH ABSTRACT: Maize is the most important field crop in South Africa. It is used for both animal feeds and human consumption. It is also used by many industries as an input, is a source of foreign exchange and of employment opportunities for many people in the country. It is an important component of the agricultural sector, plays an important role in the economy and presents opportunities in terms of agricultural investment and employment creation.The maize industry in South Africa has long history of government intervention where the price of maize was set by government through the office of the Minister of Agriculture. This was fuelled by the two Marketing Acts (of 1937 and 1968). During the period of these Acts, farmers were not exposed to international markets. However after the introduction of the Marketing of Agricultural Products Act (Act 47 of 1996), farmers have been exposed to international maize prices, i.e. to the forces of supply and demand. Farmers are no longer guaranteed a maize price during the beginning of the production season, and now have to use different methods to protect their income against a volatile maize price. Through forward contracting (hedging) their maize, farmers can minimize the price risk that they are facing. A number of instruments have been developed to assist farmers to protect themselves against price risk. In South Africa, SAFEX is used to reflect the expected future price of maize and it can be used by farmers as a reference for the expected price.Different factors affect the hedging decisions of farmers. The main objective of this study was to identify factors affecting the hedging decision of maize farmers in Gauteng, and hence their rate of adoption of hedging strategies. The study employed a number of methods in an effort to answer this question. Data analysis relating to factors affecting the hedging decision of the farmers was carried out using Excel and the SPSS statistical package and took the form of multiple cross tabulation. A Probit regression equation was estimated using the SPSS 20 statistical software package.In the case of the adoption rate of hedging by maize farmers in Gauteng, it was found that only 35 per cent of the maize farmers forward contract their maize against price risk. This implies that they are not protecting their income against price volatility through forward contracting.The results show that the factors that have the most influence on the decision whether to hedge are: the gender, age, and agricultural qualification of the principal decision maker; whether the decision maker is a member of a grain association and the size of that grain association; the length of period that the decision maker has been producing grain; the size of the farm; whether the farmer rents in land; the proportion of off-farm income earned and whether the farmer takes out insurance. These variables are all statistically significant at the 5 per cent level.

[发布机构] Stellenbosch University