Outlook on Prices Cattleman’s Conference March 08 Benoni

Introduction Overview of BFAP methodology Baseline projections –World outlook –SA outlook Future refinement Scenario analysis Conclusion

BFAP family Livestock GDP Growth BFAP SECTOR LEVEL MODEL Interest Rates Production Inputs World Prices Population Field Crops Weather Exchange Rate Policies BFAP FARM LEVEL MODEL FAPRI’s global models Biofuels CGE model (Provide) Horticulture BFAP AGGREGATE MODEL

Which industries? CerealsOilseedsLivestock & Dairy Horticulture & Viticulture Other White MaizeSunflowersChickenWinePetrol Yellow MaizeSunflower cakeBeefTable GrapesDiesel WheatSoya beansMuttonApplesEthanol SorghumSoya cakeWoolPotatoesBiodiesel BarleyCanolaPorkSugarDDG Eggs Dairy

Land reform The task of projections

The perfect storm

What is a Baseline? Baseline projections generated under combination of assumptions of the exogenous variables The baseline can be regarded as one possible scenario All existing policies - Including new biofuel strategy Focus on feed and beef

Population Source: Global Insight,

LSM segments Source: South African Advertising Research foundation

Exchange rate

World market – Fuel

World market - Maize

World market – Soybeans

SA Maize market

SA maize market

SA beef market

SA calf & beef prices

Price ratios

Future refinements Discrepancy in the databases Improvement of model –Drivers - beef price: Demand and Supply –Drivers - calf price: Carcass price lagged 4 years, current carcass price, maize/chop prices Price formation – the need for a future market to hedge Better understanding of informal sector

So what? How do I use the baseline? Scenario analyses = “What if” shocks – shock the model and understand the changes Take risk and uncertainty into account –Risk can be modelled –We need to rely on scenario planning to capture uncertainty

Economy growth shock 35% decline

Economy growth shock

2007/08 Exchange rate: R/USD

2007/08 SAFEX White maize price

2007/08 SA Beef Auction price