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Outlook on Prices Cattleman’s Conference March 08 Benoni.

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Presentation on theme: "Outlook on Prices Cattleman’s Conference March 08 Benoni."— Presentation transcript:

1 Outlook on Prices Cattleman’s Conference March 08 Benoni

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

3 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

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

5 Land reform The task of projections

6 The perfect storm

7 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

8 Population Source: Global Insight,

9 LSM segments Source: South African Advertising Research foundation

10 Exchange rate

11 World market – Fuel

12 World market - Maize

13 World market – Soybeans

14 SA Maize market

15 SA maize market

16 SA beef market

17 SA calf & beef prices

18 Price ratios

19 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

20 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

21 Economy growth shock 35% decline

22 Economy growth shock

23 2007/08 Exchange rate: R/USD

24 2007/08 SAFEX White maize price

25 2007/08 SA Beef Auction price

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