"There can be no doubt that the 'master plans' of the government for various agricultural industries are only aimed at increasing its production in order to lower the prices for BEE buyers, traders and manufacturers to increase their profitability but who will not pass any price advantage on to the consumers," says Fanie Brink, an independent agricultural economist.
He said that they will rather claim even higher protective import tariffs that they definitely will pass on to the consumers!
Brink referred to the article" “Miljoen méér hoendersweekliks geslag” which appeared in the “Rapport” today.
The producer prices for maize, as for all other agricultural products, are not determined on the total production costs plus a profit margin and high import tariffs as in the case of consumer prices but are purely determined by the local and international demand and supply of maize that are trading on the South African Futures Exchange(SAFEX), which is the agricultural division of the Johannesburg Stock Exchange.
"Agricultural producers are, therefore, ’price takers’ and not ‘price makers’ such as the traders, manufacturers and suppliers of animal feed and food products. The marketing of agricultural products is also subjected to a price inelastic demand which means that a reduction in its prices do not correspond with an increase in the demand for food."
Grain SA, which has recommended the expansion of maize production for the export market also believes that it is an "important pillar of the plan to further increase local maize production as an input for higher feed production."
“Many buyers and traders are in any case walking away with the profits they can realise at the low producer prices that they can buy on SAFEX when maize surpluses are produced and the much higher export parity prices that they can export in the international markets at the weak exchange rate.”
The South African Poultry Association and the Industrial Development Corporation, as well as the relevant agricultural department who apparently wants to be prescriptive are also involved in the master plan for maize who have nothing to do with them but will expropriate the land of commercial producers without compensation to establish subsistence farmers and developing commercial producers.
"Maize producers will decide for themselves how many hectares of maize they will plant and, as in the past, even have to reduce it again!"
They will also, firstly, have to increase their profitability by managing the input/output price ratio in maize production even better than in the past, that is, the ratio between the changes in the prices they pay for production inputs and the changes in the prices they receive for their products. The production inputs are in many cases imported at the weak exchange rate because they are no longer produced or manufactured in the country. As well as, secondly, improve the efficiency of production by applying the latest technological developments which must enable them to produce more products with the same inputs or to produce the same products with fewer inputs.
However, the buyers, traders and manufacturers of agricultural and food products succeed excellently in hiding their inefficiencies by passing on all their cost increases and profit margins in their prices to the consumers.
"Food security can only be sustainable if food production is profitable," says Brink.
