How the value chain benefits from a free market
Free market principles are essential for transparent price discovery based on supply and demand dynamics in the grain and oilseeds market. The ability to operate in a free market helps producers and traders to make informed decisions regarding trading, production, handling, and storage. As a result, the grain and oilseeds market in South Africa has flourished despite difficult conditions.
Increased efficiency and innovation are two of the main benefits that motivate producers to produce crops efficiently, using strategies that meet the demands of the market while also maximising returns.
Encouraging innovation
The effective supply chain greatly benefits from production efficiency and the efficient functioning of the market. Producers understand that state-of-the-art machinery is required for technical farming. This ensures that farming practices utilise all the available technologies to improve productivity and reduce costs, both of which are essential for sustainability.
Local and foreign investment is required to encourage growth in the grain and oilseeds sector. By default, this will create more opportunities in the production sector and will benefit the entire value chain, leading to increased employment because of a conducive environment. Along with an assurance of no government intervention, producers can independently respond to the market environment.
Access to the market
Meeting local demand contributes to food security which can only be achieved by encouraging production. It is important that exports remain competitive, as it will create opportunities for producers with surplus production to gain access to global markets. This environment ensures the long-term advantage of creating lower prices for consumers, and the delivery of higher quality products.
Risk management tools that use instruments available on the Johannesburg Stock Exchange can only be used in a free market. A free market creates opportunities for producers to focus on producing the highest value crop and to invest in such a market. Producers are afforded the freedom to sell in their chosen market while being incentivised to become more entrepreneurial.
Efficient use of resources
In South Africa, the scant availability of government resources is alleviated by a reduced need for government to subsidise activities such as farming. The reduction of interventions of a bureaucratic nature are especially conducive to productivity. Therefore, emerging small-scale farmers can easily participate in free markets both for domestic consumption and export.
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