Risk and market deregulation : attitudes of commercial farmers in KwaZulu-Natal.

Abstract

In a postal survey conducted among a sample of 112 commercial farmers in KwaZulu-Natal during 1996, sources and dimensions of risk, computer use and farmers' attitudes towards free trade and deregulated domestic markets were studied. Respondents were on average 49,5 years of age, had 24,3 years of farming experience and 14,1 years of formal education. The majority (60 percent) were individual owners of their farm business. KwaZulu-Natal was divided into three relatively homogenous areas, namely the Coastal Belt, Lowveld and Midlands. The average farm area operated in the Coastal Belt was 511 hectares, 1121 hectares in the Lowveld and 866 hectares in the Midlands. Sugar-cane was the main enterprise in the Coastal Belt, sugar-cane and beef in the Lowveld, and beef, dairy, sugarcane, timber and pigs in the Midlands. Land was cash-rented by 21 percent of respondents. Median household income for respondents who had off-farm employment was R47 375. Coastal Belt respondents had the highest debt/asset ratio (0,141) and turnover (R2 086 000), followed by respondents from the Lowveld and Midlands. Only one respondent was not aware of GATT (General Agreement on Tariffs and Trade). The most common information sources used to read about GATT included newspapers, Farmer's Weekly and Effective Farming. Most respondents expected a decrease in product prices, farm profits and land values if GATT provisions were successfully implemented, but approximately equal proportions of respondents expected input prices to increase and decrease. Most respondents supported free trade. Sixty-four percent would alter farming operations if import tariffs were reduced and/or domestic markets deregulated. Responses to deregulation included seeking market information, adding value to products, controlling costs, changing the size and/or mix of enterprises currently operated, and enterprise diversification. Changes in the cost of farm inputs, government legislation (tax, labour, and land redistribution), the Rand exchange rate, and product prices were considered as the most important sources of risk. Factor analysis of risk sources showed that various dimensions to risk exist, including changes in government policy, enterprise gross income, credit access and cost changes. Computers, a risk management tool, are more likely to be adopted by larger farm operators with higher levels of education and who use more information sources, whilst operators of extensive production systems are less likely to adopt a computer. Progressive, full-time farmers who considered themselves better financial managers and anticipated their land prices to increase under liberalised trade, were supportive of free trade. Respondents who viewed changes in environmental regulations, variability in crop and livestock prices, changes in the Rand exchange rate and the cost of inputs, and further reduction of import tariffs on farm products as important sources of risk, were opposed to free trade. Farmers with higher levels of debt repayment and knowledge of import tariffs were also likely to oppose free trade. Years of farming experience was negatively related to attitudes towards deregulated domestic markets, whilst dairy farmers, better financial managers and those more willing to take risks were more likely to support market deregulation.