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MODELLING THE MARKET OUTLOOK AND POLICY ALTERNATIVES FOR THE WHEAT SECTOR IN SOUTH AFRICA

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Abstract

In this study, the structure of the South African wheat market is analysed using economic theory and econometric modelling techniques. The developed model is used to make baseline projections regarding the supply and use of wheat in South Africa and to analyse the impacts of various policy alternatives on the wheat sector for the period 2002 2008. Results indicate that after an initial decline in the area harvested in 2003, the area harvested will increase over time. Domestic consumption will gradually decrease over time, which will result in lower levels of imports and higher level of exports. Three policy scenarios are analysed, the elimination of the import tariff for wheat, a twelve percent depreciation in the exchange rate, and the convergence of the elimination of the import tariff and the 12% depreciation in the exchange rate.

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