Financial impact of wheat quality standards on South African wheat producers: A dynamic linear programming (DLP) approach

Abstract

ABSTRACTThe South African wheat industry has been under pressure in recent years from global economic instability and a fast-changing domestic policy environment. This has manifested itself in declining wheat production and profitability at the farm level. Wheat quality plays a key role in wheat buying decisions, with quality improvements correlating negatively with yield and, ultimately, productivity. Yet any new wheat cultivar released for commercial production must still meet the standards of the country’s wheat classification system, which has led to wheat sometimes being imported in the face of a domestic shortfall. This situation has inevitably led to tension within the industry and affected both performance and pricing. Using various data sources and a dynamic linear programming (DLP) approach, this paper takes an in-depth look at the link between wheat quality and yield, with a view to determining the impact of wheat quality standards (ceteris paribus) on the profitability of South African wheat producers. Results indicated that were these classification discrepancies removed, the country-wide effect on net farm income is estimated to range between ZAR606 million and ZAR920 million per annum.