Agriculture Reference
In-Depth Information
A UCTION M ARKET
Spot market auctions currently are dominant as the primary
mechanism of exchange for South African raw mohair
where the price is publicly set. With the decline in prices
in the 1970s, the South African Mohair Growers
Association demanded an alternative marketing system.
The government established a sole agent to undertake
mohair preparation and handling; however, because of
increased cost of clipping and the poor mohair market,
growers experienced major losses.
In 1997, the Mohair Board was replaced by an indepen-
dent private sector, and mohair marketing took place in the
free market and producers were free to choose their outlets.
Besides auctions there were farm gate sales, forward
selling, contracts, electronic auctions, and tenders all
emerged as possible trading platforms between producers
and buyers. However, auction selling accounted for 96%
(Table 18.6). The trade venues have changed to contracts
and forward selling since 2001. These changes are attrib-
uted to the changes in supply and demand, and allowed
mohair producers to minimize their risk.
Spot marketing may not allow optimal fl ow of informa-
tion, goods, and returns in the supply chain, since com-
munication between producers and processors is not easily
facilitated by a spot market system. Auction markets
are an uncoordinated exchange where players seek to
fulfi ll self-interest, limited information sharing opportuni-
ties, and short-term relationships; and a relatively small
amount of attention is given to product differentiation.
There is limited communication between producers and
processors.
N ICHE M ARKET
Mohair has considerable niche market appeal because of
its unique composition and quality. Therefore, marketing
for mohair can move from the commodity marketing to
branded products with coordinated exchange and long-
term relationships. Niche marketing can obtain better
prices in other marketing outlets. Coordinating within the
mohair supply chain, in specifi c circumstances, has a
potential for obtaining better prices.
V ERTICAL C OORDINATION S TRATEGY
Vertical coordination is harmonizing the successive stages
of production and marketing, or an alignment of direction
or control across segments of the production/marketing
system. The factors that align in vertical coordination are
price, quantity, quality, and terms of exchange. It can
include successive activities from production to fi nal
product or any of the stages in between. The coordination
of the successive stages and the selection of the strategies
are dependent on the level of investment the producer has
to make and the associated rewards.
An alternative supply chain that can reduce the risk and
create income stability is important. The market for mohair
products varies from home industry crafts to custom-tai-
lored ladies' and men's apparel. Different types of mohair
can be used for different products such as carpet, uphol-
stery, blankets, and machine or hand knitting to name a
few (Table 18.7). As a result of the diverse nature of
demand for the various types of mohair, competition
among the mohair products is quite diverse. Mohair exhib-
its unique characteristics; therefore, a marketing structure
Table 18.6 Volumes (%) and values (%) of mohair per trading platform in South Africa (1998-2002).
Years
Trading platform
Volumes by mass and value
1998
1999
2000
2001
2002
Auction
Mass (%)
98
99
97
92
94
Value (%)
98
99
96
86
88
Farm Gate Sale
Mass (%)
2
1
3
2
3
Value (%)
2
1
4
4
6
Contracts
Mass (%)
6
Value (%)
10
Forward Selling
Mass (%)
3
Value (%)
6
Note: Mohair Market in South Africa (n = 44).
Source: Jordaan and Kirsten (2008) .
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