Demand and supply factors in the export of South African fresh oranges to the European Union (EU) : 1976-1993.

Abstract

This is the first empirical study of the factors affecting the demand for and supply of South African (SA) fresh orange exports into the five main European Union (EU) markets: the United Kingdom (UK), France, Germany, the Netherlands and Belgium. Simultaneous-equation models of SA fresh orange export demand and supply were specified for each market and estimated by Two-Stage Least Squares using annual data for the period 1976-1993. Export demand was negatively related to the price of SA fresh oranges relative to the price of fresh oranges from Israel in the UK, Germany, Netherlands and Belgium. In France, however, export demand was negatively related to the SA export price relative to the price of fresh oranges from Morocco. Israel appears to be the major fresh orange competitor for SA in the UK, Germany, Netherlands and Belgium, while the main competitor in France is Morocco. Export demand was also positively related with lagged SA fresh orange exports in all export demand functions. This implies that consumers in the EU markets do not adjust fresh orange consumption immediately following a relative price change, probably due to habit formation. Estimated short-run relative price elasticities of export demand were inelastic in each EU market. Export supply in all markets varied directly with lagged net export realisation price relative to the SA domestic fresh orange price. Export supply in the UK also depended on the UK price of SA oranges relative to the French price. Conversely, export supply to the other four markets was positively related to the SA orange price in each market relative to the price in the major UK market. In addition, lagged exports (showing export orientation), and supply shocks (weather) positively influenced export supply to all markets. Export supply was price inelastic in both the short-term and long-term, supporting a priori expectations that supply reacts sluggishly to changes in the relative price of fresh orange exports. The low relative price elasticities of export demand imply that Capespan International and future orange exporters may consider alternative markets to the traditional EU markets to increase real revenue. Lower import tariffs if citrus is included in a Free Trade Agreement (FTA) with the EU would make SA fresh orange exports more competitive with exports from Israel and Morocco. Fresh orange exports from SA to the EU under this scenario are unlikely to increase markedly as long-run supply is price inelastic.