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Maize prices in South Africa: Can the producer increase his revenue by marketing grain through cattle?

Author

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  • Mare, Frikkie A.
  • Nell, Wilhelm T.
  • Willemse, B.J.

Abstract

Since the decline in the price of maize from the beginning of 2010, meat has become the new buzzword under maize producers as they are desperately looking for alternatives to increase the value of their crops. It seems as if the price of maize may stay low at levels equal to export parity prices for the next year or two due to very large yields and an increasing level of ending stocks each year. On the other hand, there is the meat sector which is doing extremely well and had even shown positive growth during the worldwide financial crisis. A substantial decrease in the price of beef therefore seems unlikely and makes it a very attractive alternative market for maize. The question, however, is whether the value of maize can be increased by marketing it through beef, and what factors influence the profitability of this marketing alternative. A model simulating different scenarios with regards to the physical and financial information of a feedlot indicates that in the most cases a feedlot will have a positive margin and thus increases the value of the maize that is fed. The factors that were found to affect the margin the most in a negatively correlated relation, are the weaner price, maize price, feed conversion ratio, mortality rate and feed concentrate price, while those affecting the margin in a positively correlated way are the carcass price, slaughter percentage and average daily gain.

Suggested Citation

  • Mare, Frikkie A. & Nell, Wilhelm T. & Willemse, B.J., 2010. "Maize prices in South Africa: Can the producer increase his revenue by marketing grain through cattle?," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96646, African Association of Agricultural Economists (AAAE).
    • Handle: RePEc:ags:aaae10:96646
    DOI: 10.22004/ag.econ.96646
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    References listed on IDEAS

    as
    1. McCluskey, Jill J. & Wahl, Thomas I. & Li, Quan & Wandschneider, Philip R., 2005. "U.S. Grass-Fed Beef: Marketing Health Benefits," Journal of Food Distribution Research, Food Distribution Research Society, vol. 36(3), pages 1-8, November.
    2. repec:cup:jagaec:v:24:y:1992:i:02:p:41-47_01 is not listed on IDEAS
    3. Langemeier, Michael R. & Schroeder, Ted C. & Mintert, James R., 1992. "Determinants Of Cattle Finishing Profitability," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 24(2), pages 1-7, December.
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