A profitability and risk assessment of market strategies for potato producers in South Africa
Date
2021-08
Authors
Vosloo, Jodie
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research Consortium
Abstract
With 2.67 million tonnes of potatoes produced in 2019 (DALRRD, 2019), South Africa
contributes only 1% of global potato production (FAOSTAT, 2021). China (91 million
tonnes, 25% of world production), India (50.2 million tonnes, 14%), the Russian
Federation (22.1 million tonnes, 6%), Ukraine (20.2 million tonnes, 5%) and the United
States (19 million tonnes, 5%) were the top potato producers and consumers in 2019
(FAOSTAT, 2021). Even though South Africa, compared globally, is a small potato
producing country, potatoes are one of the most important vegetable crops in South
Africa. It is not only one of South Africa's staple foods, but it also provides livelihoods
for producers and labourers with significant upstream and downstream effects
throughout the potato value chain (van der Westhuizen, 2013). Potatoes form part of
the fresh produce industry, which is a unique sector within agriculture, with higher time
turnover than any other sector (Du Preez, 2011). Its uniqueness is characterised by
high perishability, susceptibility to shocks, and seasonality, giving grounds for price
volatility. The uniqueness combined with price volatility has led to an increase in its
marketing complexity, forcing producers to rely on spot market prices rather than list
prices like other sectors (Louw et al., 2004). Spot markets are defined as a public
financial market where commodities are traded for immediate delivery whereas listed
markets are for delivery at a future date (Geyser, 2013).