Analysing Price Risk and Volatility in the Namibian Sheep Market: A Threshold Generalized Autoregressive Conditional Heteroskedasticity (TGARCH) Approach

The objective of this paper is to analyse sheep producer’s supply response under price risk and volatility using data from January 2000 to December 2013. Different Autoregressive Conditional Heteroscedastic (ARCH) processes were compared and TGARCH (1, 1) model was selected and used to estimate expected price and price volatility effects. The study found positive inelastic short-run supply price elasticity of 0.2184 for the Namibian sheep industry. The long-run own-price supply elasticity is more elastic than in the short-run (0.6817). The findings also show that the expected price volatility (-0.1385) has a negative and statistically significant effect on producer’s supply response, this implies that sheep supply declines as the price volatility increases. The volatility effects were found to be negatively asymmetric and persistent which implies that producers tend to respond more intensely in the case of a negative shock that reduces their margin than a positive shock. Sheep producer’s attitude towards risk can be said to be averse, this hypothesis was confirmed by calculating the relative marginal risk premium which is 0.0257. The value is close to zero and may suggest no strong departure from relative risk neutrality or marginal cost pricing. Keywords: Volatility, asymmetric effects, persistence, elasticity, risk, price expectatio

Relationship Between Communal Leasehold Right and Investment in Small-Scale Farms: A Case Study in Kavango West, Mpungu Constituency

The government of the Republic of Namibia enacted the Communal Land Reform Act (Act No. 5 of 2002) to ensure the smooth administration and management of communal land resources. The impact of land reform on agricultural production and investments has had mixed results as to whether security of tenure enhances investment and productivity. This study assesses the level of investments made by beneficiaries of the leasehold rights, determines the relationship between access to leasehold rights and investments, and assesses the perceptions of the farmers on the Communal Land Reform Act using the independent T-test, Binary Logistic Regression model and situation analysis. The results indicate that leasehold tenure rights have positive effects on farmers’ decisions to invest in physical farm infrastructure. Private farmers were found to invest more than farmers in the communal land zone did. Using the situational analysis, the perception of the farmers toward the Communal Land reform Act shows that leasehold land rights are accepted to have impact on investments, while the customary land rights do not have significant impact on investments, and the farmers did not recognise its importance. Awareness campaigns on the importance of customary land registration and the importance of farm investments must be intensified. Further research is recommended on farm investments. Keywords: farm investment, land reform, security of tenure, leasehold rights, binary logisti

The Impact of Alternative Livestock Market Choice, Constraints and Opportunities: A Case of Smallholder Farmers in the Southern Communal Area of Namibia

This paper used Regression Adjustment (RA), Inverse-Probability Weighted (IPW) and the Inverse-Probability Weighted (IPW) Regression Adjustment (IPWRA) estimators to estimate the treatment effects of marketing livestock at the informal market relative to other alternative market choices on the farmers’ gross margin. Estimation is based on survey data obtained by interviewing livestock farmers in the Southern Communal Area of Namibia. Four treatment levels representing market channels are the informal market, the permit sale, auction market, and abattoir. The estimated Average Treatment Effects (ATE) of patronizing permit instead of the informal market is N$142,701.8. Moving from the informal market to the auction, the estimated ATE is N$224,547; also for a movement from the Informal market to the abattoir ATE is N$605,810.8. Results show that among the farmers who marketed at the alternative markets, there is an increase in their gross margin sales from the average of N$142,012.1 to N$145,343.4 for permit sales, N$236,677.8 for auction sales and N$578,671.3 for the abattoir sales. Quantile estimates of the potential outcome distribution were also calculated to determine whether the treatment affects those farmers at the lower end of the distribution differently from those at the middle or upper end. The result of the quantile estimate was found to be consistent with that of the conditional mean. Overall, the study found that upstream markets are more gross profit enhancing than the downstream markets ceteris paribus. Keywords: treatment effects, average treatment effects, potential outcome framework, potential outcome mean, upstream market, quantile effects

Production Frontier of Small Scale Pearl Millet Farmers: A Comparison of Conservation and Traditional Agricultural Practices in the Northern Namibia

This study fits a stochastic Cobb-Douglas production frontier of the pearl millet smallholder farmers and examined their technical efficiency comparing Conservation and Traditional Agriculture practices. The data was collected using a structured questionnaire administrated to 100 randomly selected smallholder farmers in Omusati, Ohangwena, Oshikoto, Oshana and Kavango regions during the 2014-2015 planting season. The estimated parameter of the model shows that land availability, the level of fertilizer use and tractor power explains variations in the production of pearl millet. The efficiency analysis result shows there is no statistically significant difference in the technical efficiency of farmers who were exposed to conservation agriculture compared to their traditional method of agriculture. The inefficiency model indicates that farm experience, farm size, and farm training have significant positive effect on efficiency. In addition, the study examined farmers willingness to pay for extension services, the predicted probability of getting farmers who are willing to pay is 60%. Some socio-economic factors such as farm size, herd size, and membership of a cooperative were found to influence farmers’ willingness to pay for extension service. The study recommends that Conservation Agriculture should be continued over a long period of time so that the impact can be felt. Capacity building, training, extension services, information on agronomic practices and farmer’s education are factors that policy should address. Keywords: technical efficiency, Conservation Agriculture, pearl millet, stochastic production frontier

Measuring market integration for apples on the South African fresh produce market: a threshold error correction model

Apples constitute the bulk of deciduous fruit produced in South Africa, i.e. in 2000, apples made up the largest percentage of the deciduous fruit crop (43%). From 991/92 to 2002/03 production averaged 574 850 tons per annum with a standard deviation of 43 922 tons. The average distribution of the apple crop between the local market, exports and processing is more or less even. Because of its potential lucrative nature much emphasis in the apple industry is afforded to exports, but relatively little is known about how price transmission takes place on the domestic fresh produce markets (FPMs). Moreover, it is increasingly recognized that the formulation of market-enhancing policies to increase the performance of the local market requires a better understanding of how the market functions. Aggregate market performance is better understood by studying the level of market integration that exists, which in turn is affected by transaction costs in the value chain. Hence, the primary objective of this study was to measure market integration for apples on the South African FPMs to determine the existence of long-run price relationships and spatial market linkages. Specific issues addressed in this study include, (i) determination of the effect of deregulation of the marketing of agricultural products in 1997 on average real market prices, price spread and volatility (risk), (ii) determination of how FPMs where apples are sold are linked and how prices are transmitted across these markets, (iii) determination of the threshold prices beyond which markets adjust and return to equilibrium, and (iv) establish the response of the FPMs to price shocks and how long it takes for shocks to be eliminated. The FPMs included in this study are Johannesburg, Cape Town, Tswhane, Bloemfontein, Port Elizabeth, Durban, Kimberley and Pietermaritzburg. The criteria for selecting the FPMs were based on net market positions (surplus or deficit area), geographical distribution, the volume of trade and the importance of the market to the national apple trade flow. The investigation revealed a statistically significant decline in real prices in six of the eight markets investigated, a statistically significant relation in prices (price spread) between the Johannesburg FPM and five other FPMs, as well as that the price spreads between these markets declined after deregulation, and that the variation in real apple prices declined for five of the eight markets after deregulation. Standard autoregressive (AR) and threshold autoregressive (TAR) error correction models were compared to determine whether transaction cost has significant effects in measuring market integration. Larger adjustment coefficients were found in the TAR model. This is an indication that price adjustments are faster in threshold autoregressive TAR models than in AR models. Also half-life deviations in the TAR model are much smaller than in the AR model. The TAR model requires less time for one-half of the deviation from equilibrium to be eliminated than the standard AR model. Therefore, it is better to use TAR models than AR models because TAR models give a more reliable result. In addition, the parameter estimates of the threshold vector error correction model were analyzed. The results show that bidirectional and unidirectional causality exist between Johannesburg FPM prices and other markets. Regime switching estimates to investigate market integration in the selected markets show that no persistent deviation from equilibrium existed for all but one market pair and no clear evidence was found to support improved market integration after market deregulation in 1997. A nonlinear impulse response function to investigate the impact of positive and negative price shocks in the Johannesburg FPM on other FPMs revealed that it takes about six to twelve months for positive and negative shocks to be completely eliminated in all the markets. Generally, the results obtained confirmed strong market integration in terms of apples for selected FPMs.Crop Production/Industries, Industrial Organization, Marketing,

Measuring market integration for apples on the South African fresh produce market: a threshold error correction model

Apples constitute the bulk of deciduous fruit produced in South Africa, i.e. in 2000, apples made up the largest percentage of the deciduous fruit crop (43%). From 991/92 to 2002/03 production averaged 574 850 tons per annum with a standard deviation of 43 922 tons. The average distribution of the apple crop between the local market, exports and processing is more or less even. Because of its potential lucrative nature much emphasis in the apple industry is afforded to exports, but relatively little is known about how price transmission takes place on the domestic fresh produce markets (FPMs). Moreover, it is increasingly recognized that the formulation of market-enhancing policies to increase the performance of the local market requires a better understanding of how the market functions. Aggregate market performance is better understood by studying the level of market integration that exists, which in turn is affected by transaction costs in the value chain. Hence, the primary objective of this study was to measure market integration for apples on the South African FPMs to determine the existence of long-run price relationships and spatial market linkages. Specific issues addressed in this study include, (i) determination of the effect of deregulation of the marketing of agricultural products in 1997 on average real market prices, price spread and volatility (risk), (ii) determination of how FPMs where apples are sold are linked and how prices are transmitted across these markets, (iii) determination of the threshold prices beyond which markets adjust and return to equilibrium, and (iv) establish the response of the FPMs to price shocks and how long it takes for shocks to be eliminated. The FPMs included in this study are Johannesburg, Cape Town, Tswhane, Bloemfontein, Port Elizabeth, Durban, Kimberley and Pietermaritzburg. The criteria for selecting the FPMs were based on net market positions (surplus or deficit area), geographical distribution, the volume of trade and the importance of the market to the national apple trade flow. The investigation revealed a statistically significant decline in real prices in six of the eight markets investigated, a statistically significant relation in prices (price spread) between the Johannesburg FPM and five other FPMs, as well as that the price spreads between these markets declined after deregulation, and that the variation in real apple prices declined for five of the eight markets after deregulation. Standard autoregressive (AR) and threshold autoregressive (TAR) error correction models were compared to determine whether transaction cost has significant effects in measuring market integration. Larger adjustment coefficients were found in the TAR model. This is an indication that price adjustments are faster in threshold autoregressive TAR models than in AR models. Also half-life deviations in the TAR model are much smaller than in the AR model. The TAR model requires less time for one-half of the deviation from equilibrium to be eliminated than the standard AR model. Therefore, it is better to use TAR models than AR models because TAR models give a more reliable result. In addition, the parameter estimates of the threshold vector error correction model were analyzed. The results show that bidirectional and unidirectional causality exist between Johannesburg FPM prices and other markets. Regime switching estimates to investigate market integration in the selected markets show that no persistent deviation from equilibrium existed for all but one market pair and no clear evidence was found to support improved market integration after market deregulation in 1997. A nonlinear impulse response function to investigate the impact of positive and negative price shocks in the Johannesburg FPM on other FPMs revealed that it takes about six to twelve months for positive and negative shocks to be completely eliminated in all the markets. Generally, the results obtained confirmed strong market integration in terms of apples for selected FPMs

A Profile of the Northern Cape Province: Demographics, Poverty, Income, Inequality and Unemployment from 2000 till 2007

The Northern Cape agricultural sector is a dynamic and livelihood sustainable sector. Approximately 7% of the Northern Cape value added gross domestic product comes through agriculture and 5.4% of the population in the Northern Cape is working in this sector. There is thus a need for macro-economic research in order to investigate potential and current challenges and opportunities. This paper examines several of these challenges namely demographic compositions, unemployment, income distribution, poverty and inequality. It will provide results from the Labour Force Surveys from 2000 until 2007 with a more in-depth look into 2007. Population and labour force statistics provide the foundation for further analysis. This paper indicates that unemployment is being dominated by the African and Coloured individuals and that employment in the Northern Cape agricultural sector is on a decreasing trend. It shows further that income distribution is highly skewed which leads to high levels of poverty and inequality. Agricultural incomes are lowest across all races compared to non-agricultural incomes except for the White farmers/farm workers who earn more than their counterparts in other sectors. Poverty is extremely high for Coloured workers in the Northern Cape agricultural sector but has decreased since 2000. One of the principal concerns is that of inequality. It shows no improvement since 2000 with a high in-between race inequality and lower within race inequality in the Northern Cape agricultural sector. Throughout the report the Northern Cape agricultural sector is compared to the non-agricultural sector, Northern Cape overall and South Africa for a better understanding of the Northern Cape agricultural sector’s position. This report indicates that the Northern Cape agricultural sector could benefit from intervention and support to correct the present state of decreasing employment, low income, and high poverty and inequality levels