@article{Sihlongonyane:334770,
      recid = {334770},
      author = {Sihlongonyane, L.N.},
      title = {Evaluating the prospect to hedge maize price risk against  the Johannesburg Stock Exchange Commodity Derivatives  Market prices: The case of Eswatini},
      address = {2021-01},
      pages = {98},
      year = {2021},
      abstract = {Maize production remains low in Eswatini. The small  country is still unable to meet the local demand through  local production. Maize1 is Eswatini’s staple food but the  country has not yet reached self-sufficiency. This  deficiency or shortfall in local maize production has been  a persistent problem since the country’s independence. To  fight this shortfall and reach selfsufficiency, the  National Maize Corporation (NMC) was formed in 1985. The  main purpose of the NMC is to keep the local demand  satisfied. The NMC, as the only importer of white maize  into Eswatini, does this by importing the deficit demand  from South Africa. Stability of the local white maize price  is also one of the responsibilities of the NMC. This  study’s overarching aim was to determine whether or not a  significant relationship exists between the maize prices as  quoted on SAFEX2 and the local maize price in Eswatini.  This is done to see if the importer of maize in Eswatini,  the NMC, can hedge the price risk on SAFEX. The study also  maps the Eswatini imported and local maize value-chain  through the current price discovery mechanism. Secondary  data offered by the NMC and data from the Ministry of  Agriculture in Eswatini and educational journals were used  in the study. Econometric time series methods were used  along with monthly data from 2008 to 2019. Two hypotheses  were tested during the study. The first hypothesis tested  for the existence of a significant relationship between  maize prices as quoted on SAFEX and the local maize price  in Eswatini. The second hypothesis follows the first,  determining whether or not hedging on SAFEX could be used  as a tool to minimise price risk on the domestic price  market in Eswatini. The study confirms that a long-run  relationship exists between the South African maize market  and the Eswatini maize market. The study showed that a 1%  increase in the South African price led to a 0.67% increase  in the local Eswatini prices. This indicates a slow rate  shift in prices. Short-run dynamics indicated a 12.5%  adjustment to equilibrium per term, which is a slow  adjustment as a result of market conditions in Eswatini.  The study also revealed asymmetry in price transmission and  that the Eswatini prices only respond to positive changes  (price increase) in the South African prices. This reveals  that the two markets are poorly integrated. Due to the  significant relationship between the two markets, it can be  acknowledged that SAFEX could be used to hedge price risk  by Eswatini through the NMC. Through mapping down the maize  value-chain, the study discovered that the Eswatini maize  market is not a liberalised one and value addition to maize  through the chain is minimal. The relationship between the  two maize markets, as well as the maize market of Eswatini,  could still improve if means to liberate the market were to  be exercised by the NMC and local government. This study  can serve as the basis for understanding how risk  management tools could be used by the Eswatini maize market  and how the market could be improved or liberalised.},
      url = {http://ageconsearch.umn.edu/record/334770},
      doi = {https://doi.org/10.22004/ag.econ.334770},
}