319 symposium paper

7/31/2019 319 Symposium Paper

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The Impact of the Economic Crisis on

Agricultural Trade: the Case of South Africas

Fruit and Wine Exports

Authors:

Mr. Ernst Idsardi

Agricultural Economist, North-West University, Potchefstroom, South Africa

Tel: +27 (0)18 299 2484 / +27 (0)79 139 3339 Fax: +27 (0)18 299 1544

E-mail: [email protected]

Dr. Philippus Christoffel Cloete

Agricultural Economist, North-West University, Potchefstroom, South Africa

Prof. Herman Daniel van Schalkwyk

Campus Rector, North-West University, Potchefstroom, South Africa

Paper presented at the 21st Annual Symposium and Forum of

The International Food and Agribusiness Management Association (IFAMA)

June 20 23, 2011

Frankfurt, Germany


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Abstract

The recent global economic crisis resulted in a significant drop in global trade including the

trade in agricultural and food products. This poses the question to what extend this and

previous economic recessions have had an effect on the various global trade flows of food

products. An understanding of this connection will assist exporters in their marketing

management in case of future recessions.

Few studies have looked specifically at the long-term relationship between a nations volume of

agricultural & food trade and the economic performance of its export partners. Against the

background of the recent economic crisis, this study analyses the causal relationship between

export flows of selected fresh fruits and wine from South Africa and the economic demand

capacity in the respective importing countries for the last 27 years.

Keywords: economic crisis, exports, fruit, wine, South Africa

1. IntroductionThe consequences of the global economic crisis have been manifold. In 2009, global trade has

experienced the sharpest drop in seventy years with a contraction of 12 percent in volume and

23 percent in value (WTO, 2010). Especially trade in iron, steel, manufacturers, industrial

machinery and automotives was affected severely (WTO, 2010).

The global agricultural sector has shown some resilience in this regard and has not been

affected so severely as some of the other economic sectors. The rationale behind this is that

the demand for agricultural and food products is regarded as relatively income inelastic, thus

less vulnerable to shocks in price and income (OECD-FAO, 2009). Despite this, the impact on

global agricultural trade was manifested in a decline in agricultural trade of three percent in the

total volume and 13 percent in total value in 2009 (EC, 2010). This decline in trade was

experienced after several years of consecutive growth. The most important causes for this are

the weaker demand due to the economic slowdown in import markets, currency appreciation

as well as the depressed prices for agricultural commodities (EC, 2010).

For South Africa, the effects of the economic crisis on agricultural and food exports seem to berelatively small. In 2008, the growth in the value of South Africas agricultural and food exports

was a surprising 48 percent but this growth has flattened with a mere increase of 1.9 percent in

2009 and even a small drop of 0.5 percent in 2010. From this stems the question to what

extend South Africas agricultural exports is determined by the overall economic performance

of its import markets. This link is especially of importance for South Africas export of fresh


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produce and wine, which comprises the most important agricultural export products. The total

exports of fresh fruit1

Understanding the long-term causal relationship between exports and demand-side capacity

will provide valuable insights into the fruit and wine sectors vulnerability and adjustment to

past and current economic shocks. Hence, this study will attempt to reveal a competitive edge

with regards to the linkage between South Africas exports of fruit and wine and the economic

performance in export markets against the background of the recent global economic crisis.

and wine accounted for 42.5 percent of South Africas total agricultural &

food exports in 2010 (DTI, 2011). Especially, the exports of fresh fruits such as oranges, table

grapes and apples have earned valuable foreign currency for many decades and will therefore

be, besides wine, the focus of this study.

The objectives of the study comprise of the following:

1. To provide an overview of the long-term export performance of South Africas apple, orange,

table grape and wine sector in selected export markets

2. Estimate the impact of the economic performance of the respective export markets on the

export flows of selected agricultural and food products from South Africa.

2. Approach2.1 Data

Time-series data on South Africas apple, orange, table grapes and wine export volumes and

values were used to identify long-term trade relationships and analyse long-term export

performance of the selected fresh products over the last 27 years. A brief analysis of the

economic performance in terms of export prices is also included in the study. The availability of

detailed historical international trade data is limited, therefore 1984 was chosen as the base

year for the analysis, as detailed trade data in quantities is available from that year onwards2

In order to estimate the econometric relationship between the exports of South Africa and the

economic performance of importing countries, a selection was made of export markets with a

long-term and continuous trade relationship with South Africa. Thus, only countries with a

.

1Classified according to HS Chapter 08

2The international trade data up to 2000 was sourced from the National Bureau of Economic Research (NBER) and

specified at the four-digit level of the SITC Rev. 2 classification. See also: http://nber.org/data. Trade date after

2000 was sourced from the UN Comtrade database.


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significant share in South Africas fruit and wine exports in the period from 1984 to 2010 were

selected for the analysis.

Table 1 provides an overview of the selected export markets per product, as well as an

indication of their respective economic performance and the average export unit price realised

by South Africa on those markets.

Table 1: Overview of historic trading partners of South Africas exports of fresh produce

Product Main export markets

in the period 1984-

2010

Share in SA

exports:

1984 -2010

Average SA export

unit price

(USD / Kg. or l.)

Average economic

growth:

1984-2010

Number of

recessions:

1984-2010

Table grapes

(SITC 0575)

UK

Germany

22.0%

21.7%

1.85

2.43

2.3%

1.9%

2

3

Oranges

(SITC 0571*)UK

Saudi Arabia

The Netherlands

14.4%

11.1%

10.6%

0.60

0.39

0.57

2.3%

2.8%

2.5%

3

3

1Apples

(SITC 0574)

UK

Germany

France

The Netherlands

35.4%

11.7%

5.5%

5.2%

0.87

0.83

0.89

0.89

2.3%

1.9%

1.9%

2.5%

2

3

2

1

Wine

(SITC 1121)

UK 33.6% 1.50 2.3% 2

The Netherlands 12.7% 1.61 2.5% 1

Germany 12.1% 2.07 1.9% 3

Japan 1.4% 1.77 2.0% 4

Note: * includes mandarins and tangerines

Sources: NBER, UN Comtrade, IMF (2010).

Data on the Gross Domestic Product (GDP) for the selected export partners was sourced from

the International Monetary Fund (IMF). In this study, the GDP is used as a proxy for demand

capacity3

Non-stationarity is a common problem with time-series of economic- and trade data and may

cause a spurious regression. Therefore, graphical analysis, correlogram analysis and the Im,

Pesaran & Shin (IPS) unit root test were subsequently applied to the dataset to check for

. Its hypothesised that an increase in a countrys GDP will result in an increase in

consumer income and subsequently an increase in demand for consumables, de facto including

imports of food, of that respective country. However, in line with the theory of demand

elasticity of food products, it is assumed that a contraction in GDP will lead to a relative smaller

decline in the demand for fresh produce & wine vice versa.

3Note that private consumption is generally the largest component of GDP (expenditure approach) and is

therefore used as a reflection of consumer income which will subsequently effect demand capacity.


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stationarity. Non-stationarity (i.e. unit root) was detected for all the datasets and therefore the

variables were transformed by differencing in order to make the time series stationary.

2.2 Methodology

The goal of the analysis is not to explain trade but rather the long-term effects of an importing

countrys economic performance on South Africas export flows of selected fresh produce and

wine; hence, a regression model was applied. The estimation is limited to only a few countries

and the analysis focuses on the impact of the economic performance of importers on trade

flows. A model for each of the four investigated products was specified as follows:

() = + 1() + (1)

Where SAExp is the quantity in tonnes or hectolitres exported by South Africa in year t, to

countryjand ImpGDP is the Gross Domestic Product in year tof country iin national currency

at constant prices. The regression was estimated in the log linear form to determine the

elasticity between export flows and the economic performance of the importer.

As the analysis uses a panel data framework, the F-test was applied to determine the

poolability of the individual datasets (i.e. whether the data is heterogeneous or homogeneous).

This test concluded that the time series dataset of each country is not poolable and that

country-specific individual effects should be considered in the specification of the regression

models. Egger (2002) and Martinesz-Zarzoso and Nowak-Lehmann (2003) argue that the FixedEffect Model (FEM) is the appropriate model for the analysis of trade flows between an ex-ante

preselected group of countries4

. As this is the case, this study applies the FEM for the

estimation procedure. Since all the variables in the FEM are time variant, the four models can

be estimated in one stage.

3. Results3.1 Long-term export performance

This section discusses the results of the first objective, and thus provides an overview of the

long-term export performance of the selected agricultural products. Firstly, to assist the

4The Hausman test was also applied and the results indicated that the null should not be rejected, which implies

no significant differences between fixed and random effects in all four models.


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interpretation of the results a short historic perspective is provided regarding South Africas

exports of agricultural and food products over the last decades.

The international sanctions that were put in place by many countries in the mid and late 1980s

against the Apartheid regime did not result in lower levels of overall exports of South Africa

towards. Total export volumes rose by 26 percent between 1985 and 1989, although the terms

of trade suffered (Waldmeier, 1997). The export flows under investigation in this study were

not directly affects by these sanctions as only the USA and Canada did enforce import bans on

agricultural products from South Africa in the 80s (Kaempfer, 1989). In the 1990s the

agricultural sector was subject to a number of political reforms leading to a deregulation of the

market and trade reforms. This has created both internal and external pressures and spurred

the sector to become more competitive and supply its output to new global markets (OECD,

2006). This has resulted in considerable increases in diversification and volumes of agricultural

products exported by South Africa over the last 15 years.

o Table grapes

South Africa showed an average growth in total table grape exports of 6.9 percent in the period

1984 to 2009. This was well above the global average of 5.5 percent in the same period. With

respect to the recent global economic crises; South Africas exports of table grapes showed a

negative growth rate of -8.9 percent in 2008. However, exports picked up with growth rates of

3.6 percent (below average) in 2009 and 10.7 percent in 2010.

In Figure 1 the trends in table grape exports to South Africas main export markets, the UK andGermany, for the period 1984 to 2010 is shown. The figure also marks the economic recessions

per importer, i.e. a negative growth of GDP, in the respective period. The figure shows that the

exports of table grapes to the UK and Germany showed an increasing trend with average

annual growth rates of 4.5 and 3.7 percent respectively in the period 1984 to 2010. Over time

other importers such as The Netherlands, Russia, Hong Kong, the United Arab Emirates and

Malaysia also became important export destinations for South African table grape exports.


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Figure 1: Trends in South Africas table grape exports to its main export markets (1984-2010)

Source: NBER, UN Comtrade, IMF (2011).

In light of the recent global economic crisis, Table 2 provides a more comprehensive historic

overview of the respective recessions over the last 27 years in the UK and Germany and the

trend in the exports of table grapes to those markets. From the table it seems that the exports

of table grapes are more resilient to economic recessions in Germany. The trends in South

Africas export unit price (USD / Kg.) for table grapes, which can be used as a proxy for

profitability, only decreased in two of the six recession periods (see the last column of Table 2).

Further analysis of the relationship between export profitability and economic performance of

the importing country shows that theres exists a very weak and statistical insignificant negative

correlation between the two (see Table 7 in Appendix I).

Table 2: Recessions in export markets and trends in South Africas table grape exports

Recessions Contraction of

GDP

Trend in quantities of table

grapes exported by SA to the

respective market

Trend in SAs export

unit price

United Kingdom - 1991 -1.4% -1.7% -7.7%

Germany 1993 -0.8% -14.2% 21.8%

Germany 2003 -0.2% 8.5% 27.7%

United Kingdom - 2008 -0.1% -0.7% 7.3%

Germany - 2009 -5.3% 4.1% 4.4%

United Kingdom 2009 -4.4% -11.9% -8.2%

Source: Own calculations based on IMF, NBER and UN Comtrade data (2010).

0

10000

20000

30000

40000

50000

60000

70000

80000

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Tonnrs

Exports to the UK Exports to Germany

X Recession


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o Oranges

South Africa showed an average annual growth of 2.2 percent and total increase of 463 percent

in the exports of oranges in the period 1984 to 2009. Compared to the average annual increase

of 4.4 percent globally and a total increase of world trade in oranges of 168 percent, this is an

excellent performance. The global trade in oranges was not affected negatively during the

recent global recession. This is illustrated by a 7.4 percent increase in global quantities exported

in 2008 and a remarkable 17.4 percent increase in 2009. However, the quantities of oranges

exported by South Africa to the world dropped by 43.7 percent in 2008 and 12.2 percent in

2009. In 2010 South Africa showed a significant recovery of 21.9 percent.

Figure 2 provides an illustration of the long-term trends in quantities of oranges exported to

South Africas traditional export markets for this product, namely the UK, Saudi Arabia and the

Netherlands. Exports to all of these markers showed an upward trend in the depicted period.

The figure also marks the economic recessions for each export market for the period 1984 to2010. Over time other export destinations such as Russia, the United Arab Emirates, the US and

Honk Kong have gained importance, this has resulted in a somewhat sideways trend of exports

to the UK and Saudi Arabia. Exports to the Netherlands however, has only gained momentum

from the late nineties.

Figure 2: Trends in South Africas exports of oranges to its main export markets (1984-2010)


0

50000

100000

150000

200000

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Tonnes

Exports to the UK Exports to Saudi Arabia Exports to the Netherlands X Recession


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Table 2 provides an overview of the economic recessions that occurred in South Africas main

export markets for oranges in the period from 1984 to 2010. Both the UK and Saudi Arabia

faced three recessions in the depicted period. However, contrasting to expectations, not all

instances of negative GDP growth in an export market have resulted in a decrease of South

Africas exports of oranges to the respective market. Even so, a relative small recession in SaudiArabia in 1999 was parallel to a relative large drop in imports of oranges from South Africa by

that country in the same year. Nevertheless, this causality between the economic performance

of an export partner and imports from South Africa is further analysed in the next section.

The trends in South Africas export unit price (USD / Kg.) for oranges, which can be used as a

proxy for profitability, decreased in six of the seven recession periods (see the last column of

Table 3). Further analysis of the relationship between export profitability of oranges and

economic performance of the importing country reveals that theres exists a very weak and

statistically insignificant correlation between the two (see Table 8 in Appendix I).

Table 3: Recessions in export markets and trends in South Africas exports of oranges


GDP

Trend in quantities of oranges

exported by SA to the respective

market

Trend in SAs

export unit price

Saudi Arabia - 1985 -4.3% -4.7% -5.9%

Saudi Arabia 1987 -4.0% -5.2% -33.3%

United Kingdom - 1991 -1.4% 12.5% -1.7%

Saudi Arabia 1999 -0.7% -33.6% 40.2%

United Kingdom 2008 -0.1% 21.7% -24.9%

Netherlands 2009 -3.9% -14.5% -2.0%

United Kingdom 2009 -4.9% -1.8% -17.6%


o Apples

South Africa showed a moderate average annual increase of 2.2 percent in the quantities of

apples exported in the period 1984 to 2009. The total increase in global trade of apples

between 1984 and 2009 was 215 percent were South Africa only recorded a total increase of

22.3 percent in apple exports. Global trade in apples was affected moderately during the recent

global economic crises. Trade in apples increased with 1.9 percent in 2008 but dropped with 3.1

percent in 2009 globally. A similar trend for South Africas exports of apples; a 4.7 percent

(above average) increase in 2008 followed by a significant drop in exports of 11.1 percent in

2009. In 2010 exports picked up again with an increase of 6.9 percent.


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Figure 3 shows the long-term trend in quantities of apples exported by South Africa to its main

export partners, namely the UK, France, the Netherlands, and Germany in the period 1984 to

2010. The UK was and is by far the most important export market for South African apples.

Exports to this country as well as to the Netherlands showed an upward trend over the last 25

years, in contrast to the exports of oranges to France and Germany which were on the decline.Apart from these four traditional markets, other export destinations such as Malaysia, the

United Arab Emirates, have gained momentum over time. Figure 3 furthermore marks the

various economic recessions in the respective export markets between 1984 and 2010.

Figure 3: Trends in South Africas exports of apples to its main export markets (1984-2010)


Table 4 provides an overview of the economic recessions in the traditional export markets for

South African apples in the last 27 years. In five of the nine investigated recession periods didSouth Africa experience an expected decline in the exports of oranges to the respective market.

Hence, a more in-depth analysis in the relationship between South Africas exports of oranges

and the economic performance of the export market is required and provided in the next

section.

0

20000

40000

60000

80000

100000

120000

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Tonnes

Exports to the UK Exports to France

Exports to the Netherlands Exports to Germany

X Recession


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The trends in South Africas export unit price (USD / Kg.) for apples, which can be used as a

proxy for profitability, decreased in eight of the nine recession periods (see the last column in

Table 4). Further analysis of the relationship between export profitability of apples and

economic performance of the importing country shows that theres exists a very weak,

statistical insignificant and negative correlation between the two (see Table 9 in Appendix I).

Table 4: Recessions in export markets and trends in South Africas exports of apples


GDP

Trend in quantities of apples


market

Trend in SAs

export unit price

United Kingdom - 1991 -1.4% 65.4% 59.0%

France 1993 -0.8% 209.7% -49.4%

Germany - 1993 -0.8% -45.9% -45.9%

Germany 2003 -0.2% 13.6% -2.0%

United Kingdom 2008 -0.1% 10.2% -0.8%France 2009 -2.5% -16.5% -5.8%

The Netherlands 2009 -3.9% -31.4% -9.8%

Germany 2009 -4.7% -23.5% -19.0%

United Kingdom 2009 -4.9% -7.8% -7.7%


o Wine

South Africas total wine export showed a staggering increase of 7170 percent in the period

from 1984 to 2010. The average annual increase was 22.4 percent in that same period. Global

trade in wine decreased with 21.5 percent in that same period, thus South Africa performed

very well in comparison. During the recent global economic crisis the global trade in wine

increased slightly with 0.7 percent in 2008 but fell with 5.1 and 57.1 percent in 2009 and 2010

respectively. In that same period wine exports by South Africa dropped with 13.5, 0.7 and 8.7

percent in 2008, 2009 and 2010 respectively. Hence, it seems that the trade in wine was

negatively affected by the latest economic crisis.

Figure 4 shows the long-term trend in South Africas exports of wine to its main export markets,

namely the UK, the Netherlands, Germany, and Japan. The UK was by far the most importantexport destination for South African wines in the last 27 years. From the Figure it is evident that

wine exports were relatively low in the 1980s and the beginning of the 1990s and increased

considerably from the mid 1990s onwards. Apart from these four traditional markets, South

African wines are increasingly being exported to markets such as Sweden, Denmark and the


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USA. Figure 4 also marks the economic recessions in the respective importing countries in the

period 1984 to 2010.

Figure 3: Trends in South Africas exports of wine to its main export markets (1984-2010)


An overview of the various recessions in South Africas export markets for wine products is

provided in Table 5. In only three of these eleven recession periods did South Africa experience

a decrease in wine exports to the respective market. The next section will investigate this

relationship further. The profitability in the export markets, proxied by the export unit price

(USD / ltr.), is provided in the last column. In seven out of the eleven recession periods did this

unit price show a decreasing trend. Further analysis of the relationship between export

profitability of wine and economic performance of the importing country revealed that there

exists a very weak, statistically insignificant and negative correlation between the two (see

Table 10 in Appendix I).

0

20000

40000

60000

80000

100000

120000

140000

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Tonnes

Exports to the UK Exports to the Netherlands

Exports to Germany Exports to Japan

X Recession


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Table 5: Recessions in export markets and trends in South Africas exports of wines


GDP

Trend in quantities of wine


market

Trend in SAs

export unit price

UK 1991 -1.4% 36.1% 11.7%

Germany 1993 -0.8% 20.4% -8.0%Japan 1998 -2.0% 77.4% 3.3%

Japan 1999 -0.1% -41.5% -37.8%

Germany - 2003 -0.2% 17.5% 32.2%

UK - 2008 -0.1% 14.1% -6.3%

Japan 2008 -1.2% -70.8% 165.9%

UK - 2009 -4.9% 11.2% -9.5%

Germany - 2009 -4.7% 6.2% -14.1%

The Netherlands 2009 -3.9% -1.3% -6.8%

Japan 2009 -6.3% 146.1% -34.4%


3.2 Regression Analysis

The second objective of this study is to estimate the impact of the economic performance of

the importers country on the respective export flows of South Africa. In Table 6 the estimation

results of the Fixed Effects Model (FEM) for table grapes, oranges, apples and wine is depicted.

From the table it is evident that in none of the four models the coefficients for the importers

GDP was found to be a significant determinant of South Africas export flows of table, grapes,

apples, oranges, apples and wine. The overall goodness of fit of the four models, reflected by

their respective adjusted R Square, also indicates that the models do not explain the variation

in the respective export volumes to a sufficient extend. The country-specific effects, as

determined by the FEM, will not be discussed as these were not to be found significant.

Table 6: Estimation results of the Fixed Effects Model

Table Grapes Oranges Apples Wine

Coeff. Prob. Coeff. Prob. Coeff. Prob. Coeff. Prob.

C -0.002 0.976 -0.049 0.646 -0.086 0.468 0.146 0.008

DIMPDGP 0.681 0.697 4.526 0.139 2.820 0.508 0.621 0.729

Adj R -0.031 -0.007 -0.031 -0.037

Periods included 26 26 26 26

Cross sections 2 3 4 4

Source: Own calculations in Eviews


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4. Conclusions4.1 Export flows and the economic performance of importers

The initial graphical analysis of the long-term relationship between South Africas exports of

selected fruit products as well as wines, and the economic performance of traditional importingcountries indicated mixed results. Looking specifically at the different recession periods in the

last 27 years in the various export markets it occurs that in 17 out of the total 33 cases South

Africas export volume of the investigated products did decrease. Especially, the exports of

oranges and table grapes seem to be negatively affected by economic recessions in their

traditional export markets.

During the latest global economic crisis of 2008 and 2009, all of the investigated export

partners experienced a contraction of their economies in either one or both years. South

Africas total exports did decrease in 2008 for three of the four products (except for apples) and

similarly in 2009 (except for table grapes). Especially wine experienced a large drop in total

volumes exported in 2008, 2009, and even 2010. However, the analysis in section 3.1 revealed

that the export performance of each of the selected products differed considerably amongst its

traditional export markets during the latest economic crisis. Thus explicit conclusions cannot be

drawn from this initial analysis apart from the fact that recessions in the past did not per se

have a negative impact on the export volumes of table grapes, oranges, apples and wine.

The analysis in section 3.1 also looked at the correlation between the profitability (measured

by the export unit price) and the economic performance (measured by GDP growth) for table

grapes, oranges, apples and wine in each of their respective export markets. Although exportprices of the selected products decreased in almost all of the investigated export markets

during the latest economic crisis, no significant correlation was found on the long-run.

The analysis of the causal relationship between the economic performance of an export partner

and the respective export flows of South Africa was statistically tested by applying a panel data

regression analysis. It was hypothesised that such a relationship exists but that it should be

weak due to the relative income inelastic demand for food products. Hence, a decrease in

disposable income of consumers in (traditional) export market does not results in a relative

similar decrease in demanded volumes for table grapes, oranges, apples and wine from South

Africa. Furthermore, since wine is a more high-value product it was expected that its demand

would be more income elastic.

From the econometric analysis it can be concluded that there exists no significant long-run

relationship between the growth and decline of an importers GDP and the variation in South

Africas exports of table grapes, oranges, apples and wine to those markets. Thus the export


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demand for South African fruit and wine is determined by factors other than economic

performance i.e. changes in income. These outcomes will provide an incentive for further

research on the variations in South Africas export flows of food as well as income elasticities

for food products in South Africas main export markets.

4.2 Management implications

The analysis in this study is conducted from a demand perspective. Hence, further analysis of

the overall effects of an economic crisis on the fruit and wine sector will also have to take input

effects into consideration as prices for intermediaries such as fertilisers and agricultural

machinery may change due to contractions in the global economy. As his study focuses on the

marketing-side, it will assist exporters in the South African fruit and wine sector in crafting

strategies around future recessions in export markets.

Therefore the management implications of the relationship between fruit & wine exports and

the economic performance of export partners are summed up below:

o Economic growth in South Africas traditional export markets will not per se lead to more

demand, thus a focus on taste, quality, price and competitiveness of relative homogeneous

products such as table grapes, oranges, apples and wine is of decisive importance to

maintain demand at all times.

o A recession in a South African export market will not per se lead to less demand for table

grapes, oranges, apples and wine; thus production planning and marketing programs of an

exporter should take account of this.o Apart from exogenous exchange rate effects, the market-profitability of the exports of

table grapes, oranges, apples and wine is not significantly affected by the economic

performance of importing countries. In other words, the export prices of exports to a

country that is in an economic recession do not per se decrease or increase. Hence, the

financial planning of an exporter should take cognisance of this.

o There exists no difference between fresh fruit commodities (e.g. table grapes, oranges,

apples) and high-value, processed fruit products (e.g. wine) with regards to their respective

causal relationship between exported volumes and an importers economic performance.

Hence, diversifying the export basket of an exporter with agricultural commodities as apro-active strategy to tackle economic downturn in an export market is not necessary.


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5. References

DTI (2011) Department of Trade and Industry: South African Trade Statistics Database

[Internet]. Available from: http://apps.thedti.gov.za/econdb/raportt/defaultrap.asp Accessed in

April 2011

EC (2010). EU Agricultural Trade: Back on Track?Monitoring Agri-trade Policy, No. 01-10, June

2010. European Commission (EC), Brussels

Egger, P. (2000). A note on the Proper Econometric Specification of the Gravity Equation.

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APPENDIX I

Relationship between the changes in the importers GDP and the export unit price

Table 7: Pearson correlation analysis for the export unit price of table grapes and the importers GDP

Change in

importers GDP

Change in

export unit price

Change in importers GDP Pearson Correlation 1 -.114

Sig. (2-tailed) .416

N 53 53

Change in export unit price Pearson Correlation -.114 1


N 53 53

Table 8: Pearson correlation analysis for the export unit price of oranges and the importers GDP

Change in

importers GDP

Change in

export unit price

Change in importers GDP Pearson Correlation 1 .140


N 80 80

Change in export unit price Pearson Correlation .140 1


N 80 80

Table 9: Pearson correlation analysis for the export unit price of apples and the importers GDP

Change in

importers GDP

Change in

export unit price

Change in importers GDP Pearson Correlation 1 -.047


N 107 107

Change in export unit price Pearson Correlation -.047 1


N 107 107


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Table 10: Pearson correlation analysis for the export unit price of wine and the importers GDP

Change in

export unit price

Change in

importers GDP

Change in export unit price Pearson Correlation 1 -.054


N 107 107

Change in importers GDP Pearson Correlation -.054 1


N 107 107

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