PR - Evaluation Of Basic White Maize Pricing Strategies Vs Spot Market Pricing Strategies (p467-476)

D.B. Strydom, Grové, B., J. Henning and B.J. Willemse

No 345598, 18th Congress, Methven, New Zealand, 2011 from International Farm Management Association

Abstract: The use of modern marketing strategies to minimize risk exposure is not a widely adopted practice amongst maize producers. The producers tend to use high risk strategies which include the selling of the crop on the cash market after harvest; whilst the high market risks require innovative strategies including the use of futures and options as traded on South African Futures Exchange (SAFEX). This is mostly due to a lack of interest and knowledge of the market. The purpose of the study is to examine whether the adoption of a basic routine strategy is better than adopting no strategy at all. The study illustrate that by using a Stochastic Efficiency with Respect to a Function (SERF) and Cumulative Distribution Function (CDF) that the use of five basic strategies namely a Put (plant time)-, Twelve-segment-, Three-segment-, Put (pollination) and Sell after pollination can be more rewarding. These strategies can be adopted by farmers without an in-depth understanding of the market and market-signals. The results obtained from the study illustrate that producers who tend to be more risk neutral would prefer using the Twelve-segment- or Spot-strategy whilst a risk averse producer would prefer the Three-segment, Feb-Put or Dec-Put strategy. It also indicates that no strategy can be labelled as the all-time best and that the choice between strategies depends on the risk aversion of the producer.

Keywords: Marketing; Crop Production/Industries (search for similar items in EconPapers)
Pages: 10
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ifma11:345598

DOI: 10.22004/ag.econ.345598

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