A profitability and risk assessment of market strategies for potato producers in South Africa

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Vosloo, Jodie
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African Economic Research Consortium
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).