Farmers' Choice of Cattle Marketing Channels in Rural South Africa: A Transaction Cost Economics Perspective

This study empirically tests the hypotheses that information, negotiation, and monitoring costs influence the decision to sell to private buyers, speculators, or at the auction pens among smallholder farmers in KwaZulu-Natal, South Africa. Based on survey data, the results of a Multinomial Logit regression reveal that the probability of selling at the auction vs. selling at farm gate increases during the end-of-year festive season, indicating the scope of market uncertainty surrounding auctions. They also show that the probability of selling at the auction vs. selling to speculators increases with proximity to the auction marketplace and decreases with knowledge of the buyer, suggesting higher opportunity costs of time and efforts associated with selling at the auction, and considerable negotiation and monitoring costs incurred when selling to speculators. Other significant predictors of auction channel selection are volume supplied and farmer’s age. This study concludes with some policy implications.

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 Record created 2017-04-01, last modified 2019-08-30

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