Measuring Asymmetric Price and Volatility Spillover in the South African Broiler Market

This study investigated asymmetric price and volatility spillover in the broiler value chain. The data used for the study includes farm and retail broiler monthly prices dated from January 2000 to August 2008. The threshold autoregressive (TAR) and momentum threshold autoregressive (M-TAR) models were used to investigate asymmetry in farm-retail market prices, whereas the exponential generalised autoregressive conditional heteroskedasticity (EGARCH) model was used to measure price volatility and the volatility spillover effect between retail and farm prices. Price asymmetry was found between farm and retail prices with retail prices responding more rapidly (with a lag) to negative than positive changes in farm price. The results indicate that within one month, the retail prices adjust so as to eliminate approximate 2.8 % of a unit-negative change in the deviation from the equilibrium relationship caused by changes in producer prices. This implies that the retailers must increase their marketing margin by 2.8% in order to response completely to a unit-negative change in farm prices. The results from the volatility model show that the magnitude of volatility in the retail and farm prices for the periods 2000M1 to 2008M8 is 1.8% and 2.8%, respectively, with significant asymmetric volatility spillover from the farm to retail level of the value chain. This implies that the response to positive shock at any production and marketing stage differs from the response to a negative shock.Livestock Production/Industries,

Logistical estimation of the probability of mainstream market participation among small-scale livestock farmers: a case study of the Northern Cape province

Livestock farming significantly contributes to income generation and the improvement of the livelihoods of the rural poor in the Northern Cape. However, profitability and sustainability in the sector are constrained by low returns to investment due to a number of factors. The study investigates the factors influencing mainstream market participation among small-scale farmers in the five districts of the province. The main aim is to calculate the probability of small-scale farmers selling their livestock to more profitable mainstream markets, for example auction pens, against the odds of selling to informal speculators. A binary logistic regression model is applied to primary data collected from 60 sampled households in the districts of Kgalagadi, Pixley ka Seme, Frances Baard, Siyanda and Namakua. The partial effects of the conditional probability of selling livestock to mainstream markets and the impact of changes to the variables on the probability of selling to formal markets are estimated. The results show that farming experience, extension visits and infrastructure have a profoundly positive effect on the probability of small-scale farmers marketing their animals to the mainstream markets. On the other hand, household size, distance to the nearest market, and whether or not farmers have outstanding debts have a negative impact on the probability of them selling their animals to the formal markets. A unit increase in the farmer’s debts, household size and distance to nearest market decreases the probability of profitable operation by 69.84%, 9.04% and 2.79% respectively. This result implies that an intervention policy is needed to alleviate these constraints that are impeding participation in the mainstream markets

Measuring Asymmetric Price and Volatility Spillover in the South African Broiler Market

This study investigated asymmetric price and volatility spillover in the broiler value chain. The data used for the study includes farm and retail broiler monthly prices dated from January 2000 to August 2008. The threshold autoregressive (TAR) and momentum threshold autoregressive (M-TAR) models were used to investigate asymmetry in farm-retail market prices, whereas the exponential generalised autoregressive conditional heteroskedasticity (EGARCH) model was used to measure price volatility and the volatility spillover effect between retail and farm prices. Price asymmetry was found between farm and retail prices with retail prices responding more rapidly (with a lag) to negative than positive changes in farm price. The results indicate that within one month, the retail prices adjust so as to eliminate approximate 2.8 % of a unit-negative change in the deviation from the equilibrium relationship caused by changes in producer prices. This implies that the retailers must increase their marketing margin by 2.8% in order to response completely to a unit-negative change in farm prices. The results from the volatility model show that the magnitude of volatility in the retail and farm prices for the periods 2000M1 to 2008M8 is 1.8% and 2.8%, respectively, with significant asymmetric volatility spillover from the farm to retail level of the value chain. This implies that the response to positive shock at any production and marketing stage differs from the response to a negative shock