Masters Degrees (Agricultural Economics)

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Open Access
Simulation studies on Digitaria eriantha Steud. Subsp. eriantha at differing soil nitrogen levels
(University of the Free State, 1993-11) Howard, Micheal David; De Jager, J. M.
Abstract not available
Open Access
A financial evaluation of RFID technology in sheep feedlots
(University of the Free State, 2018-06) De Wet, Pieter-Steyn; Lombard, W. A.; Willemse, B. J.
Agricultural producers are confronted with a wide range of challenges early in the third millennium. Population growth and changing consumption patterns will cause world food, feed and biofuel requirements to more than double by 2050 and will require sustainable solutions. South Africa also faces these challenges with the population predicted to increase further, and the demand for mutton is predicted to increase by 5% between 2016 and 2026. This poses a challenge to the local sheep producers in South Africa to meet the growing demand. The implementation of digital systems will greatly improve the way producers use the resources available to produce the required amount of food for the growing population. Precision agriculture technology is paving the way for South African agricultural producers to manage inputs more precisely. One of the latest additions to the South African precision farming tools is the use of radio frequency identification (RFID) systems. However, the available precision farming research investigating these technologies and systems has mostly focused on the crop industry. Limited precision research has focused on the livestock industry, especially on the South African sheep feedlot industry. The aim of this study was to evaluate the financial viability of implementing RFID technology in a South African sheep feedlot. This study is based on data that was collected from a sheep feedlot in the Western Cape province of South Africa. The sample size comprised 508 lambs supplied from 35 different producers. In the study, two feedlot scenarios were created to investigate the monetary benefit that a RFID system would hold for an investor. The analysis of the first scenario was done by drafting (removing) non-performing animals from the feedlot on day 14 to determine how much feed can be saved by culling them early on in the feedlot cycle. The analysis of the second scenario was done by identifying the worst third of the suppliers after a one-year test period based on the performance of their lambs. From year 2 onwards, the feedlot only bought lambs from the top two-thirds of suppliers. Besides only purchasing lambs from these top suppliers, the RFID system continued drafting non-performing animals based on their performance up to day 14 in the feedlot. By drafting the non-performing animals and suppliers, a monetary value could be placed upon the management benefits provided by the system to the investor. The cash flows of each of the scenarios were measured with selected financial indicators to determine the viability of investing in a RFID system. The financial indicators indicated that investment in a RFID system should only be considered under the condition of scenario 2, in which the information gathered by the system was used to identify better performing suppliers of lambs. If the only purpose of investing in a RFID system is to draft animals during their feedlot period, it should not be considered. The model developed in this study contributes to the knowledge base of the South African sheep feedlot industry. It is a convenient instrument to assist sheep feedlots in decision making regarding an investment in RFID technology.
Open Access
The economic cost of large stock predation in the North West Province of South Africa
(University of the Free State, 2014-07) Badenhorst, Coenraad Geldenhuys; Van Niekerk, H. N.; De Waal, H. O.; Strydom, D.; Jordaan, H.
English: Predation is a problem for livestock farmers in many parts of the world and increasing losses are ascribed to predation. The black-backed jackal (Canis mesomelas) and caracal (Caracal caracal) are two important medium size predator species among South African wildlife, but they have a negative impact on the livestock industry in South Africa, especially on small livestock such as sheep and goats. These two predators and also brown hyaena (Parahyaena brunnea), cheetah (Acinonyx jubatus), dogs (Canis familiarise) and leopard (Panthera pardus) are responsible for losses of small and large livestock in several provinces. A number of studies have focused on the cost of predation on small livestock, specifically the direct cost of predation, and only a few studies have looked at the different methods to help farmers to minimize or eliminate losses due to predation. However, no study has quantified the direct as well as the indirect cost of predation on cattle in South Africa. The study focused on predation losses of cattle in South Africa. A sample of 1 500 cattle farmers was divided between provinces in relation to the number of cattle in provinces as percentage of the national cattle herd. The Western Cape and Gauteng did not want to participate in the study; the structured questionnaire was used to conduct a survey by telephone with the remaining sample size of 1 344 cattle farmers in seven (7) provinces. For the purpose of this report (dissertation) only the North West province was explored in detail and the primary information for the six other provinces are included as appendices. Three main objectives were pursued, namely: to quantify the direct and indirect losses ascribed to predation; to determine the impact of predation on the large livestock industry in the North West province; to investigate the underlying structures in the predation prevention practices used by farmers in the North West province; to improve the understanding of the current behaviour of the farmers in preventing predation, and to investigate the factors that influence predation in the North West province, in order to identify prevention approaches that are associated with reduced predation. Such information may contribute to the identification of possible best management practices for predation prevention. The study (reported in the dissertation) was conducted in the four magisterial districts of the North West province namely: Bojanala Platinum District, Bophirima District, Ngaka Modiri Molema District and Southern District. The sample size of this study was 238 respondents who farmed commercially with a total of 122 780 head of cattle or 16% of the total number of cattle in the North West province. Telephonic interviews were used to collect data from the farmers. The structured questionnaire included questions on topics such socio-economic factors, managerial factors and the methods used to protect the livestock. The majority of the losses in the four magisterial districts of the North West province were caused by the black-backed jackal followed by the caracal. The percentage of losses due to the caracal is markedly lower than those caused by the black-backed jackal. The reason for the lower predation is not clear, but it is speculated that it may be a result of the smaller population of the caracal and the fact that caracal are solitary predators and do not hunt in groups. The direct cost of predation losses (cattle) in the North West province was estimated at ZAR67 776 800, when extrapolating predation losses on a provincial basis. The indirect cost of predation in the North West province was divided into a lethal cost of predation (ZAR7 455 333) and the non-lethal cost (ZAR9 087 653). Therefore, the total cost of predation in the North West province was estimated at ZAR84 319 786. This study showed that 37% of farmers in the North West province use lethal control methods and only 14% use non-lethal methods of control. The lethal preventing methods are divided into six types of methods that include: shooting predators at night with spotlights (15%), using specialist hunters (6%), foothold traps (1%), cage traps (8%), hunting with dogs (2%) and poison (5%). The non-lethal methods are: herdsmen (8%), electric fences (1%), jackal proof fences (<1%), kraaling (4%) and guarding dogs (1%). The list of methods available in the toolkit for farmers to manage predation on cattle is shorter than for sheep and goat farmers. Most appropriate methods available to farmers to control predation or mitigate the impact of predation (non-lethal and lethal) on cattle were used by respondents. However, none of these methods when used individually or when a few were used in combination, proved to be a one-for-all solution at the provincial level. At the district level there were indications that some methods were more effective in reducing the impact of predation. The information suggests that all the appropriate methods and equipment available must be incorporated in the local predation management approach and strategy. The data were used to investigate the underlying structures and also to identify the best management practices. The principal component regression (PCR) tools were used to analyse the data and deal with the problem of multi co-linearity. The Pairwise Granger Causality test was used to analyse the direction of causality. The study included 42 different explanatory variables that were divided into four groups namely: socio-economic factors, managerial factors, lethal control methods and non-lethal control methods. There were 11 significant variables in the PCR (Logit) and 22 significant variables in the PCR (Truncated). The causality tests showed that none of the Logit variables had a Granger cause, but there were two Tobit variables that had a Granger cause. These two lethal methods had a negative effect on the level of predation. These results were unexpected, but this effect may be because of inexperienced farmers who kill predators that do not cause problems thereby causing a “vacuum” effect of new predators moving in. The conclusions of Van Niekerk (2010) were confirmed, namely the factors that affect the occurrence of predation and those factors that affect the level of predation are not the same. This study does not provide definitive answers to predation, but it helps to understand predation better with a view to develop appropriate management solutions. The total direct and indirect cost of predation on cattle in the different provinces and South Africa was: Western Cape - NA; Northern Cape - ZAR19 943 079; Free State - ZAR117 600 433; Eastern Cape - ZAR4 827 237; KwaZulu-Natal - ZAR66 027 879; Mpumalanga - ZAR43 938 376; Limpopo - ZAR46 486 017; Gauteng - NA; North West - ZAR84 319 786; South Africa - ZAR383 142 807. In summary, the respondents in six (6) of the seven (7) provinces ascribed the majority of the predation losses on cattle to the black-backed jackal. The exception was the Limpopo province where the leopard was implicated to account for most of the predation losses on cattle. In some provinces the second most predation losses were ascribed either to the caracal, brown hyaena, leopard, dogs or cheetah. It should be noted that some uncertainty may exist in the ability of farmers to identify positively the specific predator responsible for the losses. In some cases secondary scavenging on cattle may also have been mistaken for predation. It clearly calls for increased efforts to increase the skills of farmers to identify the specific methods used by predators to catch and eat their prey. The widespread negative impact of predation losses to sheep, goats and cattle can hardly be ignored any longer. A third study by the UFS will soon commence to estimate the impact of predation on the wildlife ranching sector. Currently the approach to manage predation is fragmented and uncoordinated. The scale and impact of predation in South Africa calls for a focused and coordinated predation management and research programme to reduce (mitigate) the negative impact of predation.
Open Access
Die teeltstruktuur van die Suid-Afrikaanse merino
(University of the Free State, 1977-12) Erasmus, Gert Johannes; De Lange, A. O.
English: 1. An analysis of the flock records kept by the Merino Stud Breeders' Association of South Africa is made. A qualitative classification of studs according to definition is made in an effort to determine the breed structure of the Merino. 2. The number of registered breeders as well as the total number of stud ewes shows. a sharp increase to 1967 with an equally sharp decline between 1970 and 1973. 3. The abovementioned changes are largely to be found in the ranks of the smaller studs. 4. The average number of stud ewes per breeder has stabilised at approximately 230 since 1966. 5. It is found that smaller studs have a smaller chance of survival. 6. The 773 active studs. in 1974 are classified as follows by definition: 15 “parent” studs, 258 “daughter studs”, 431 “general” studs, 69 “isolated” studs. 7. The "parent" studs are dominated by three studs and their "daughters" as far as supplying rams is concerned. Large differences in number of stud ewes and number of stud and and flock rams sold exist between parent studs. 8. The "family groups" ("parents" plus "daughters") are the largest vendors of stud rams (76,3 per cent of 'total) while the "general" studs and family groups sell approximately the same number of flock rams. 9. It is estimated that the registered Merino breeders supply only approximately 54 per cent of the total number of Merino rams required in the Republic. 10. Although the average number of stud ewes per breeder is small, it is estimated that registered breeders each possess on the average approximately 2 000 commercial ewes. The recommendation is made that the size of the present stud flocks be in: creased by making use of these ewes. 11. It is calculated that the registered breeders sell on the average approximately 37 per cent of their available rams but that this proportion varies considerably. The proportion of rams sold has no connection with stud size. Many registered studs sell no rams. 12. It is concluded that the breed structure of the Merino rather tends towards a two-tier structure than a classical three tier pyramid. Most of the studs are relatively more dependant on within-flock selection of rams for breeding improvement than on rams purchased. It can, however, be concluded that a more precise description of breed structure is necessary. 13. Evidence pertaining to the existence of a selection plateau in fleece weight in many cases is discussed. It is concluded that effective selection on measured performance is a necessity. 14. The implications of the present breed structure on the strategy of extension efforts with regard to the National performance Testing Scheme is discussed. It is concluded that an extension program directed at the whole Merino industry is needed and that a fleece analysis service cannot be restricted to certain "elite" flocks. 15. It is found that Merino stud flocks are largely centered in the Eastern Karoo area. The implications of this situation is discussed. 16. The necessity of inter-flock comparisons of actual genetic merit is stressed.
Open Access
Water footprint assessment of maize and associated broiler production in South Africa
(University of the Free State, 2017-08) Nkhuoa, Phoka Gerald; Jordaan, Henry; Matthews, Nicolette
South Africa is a water-scarce country. Globally, the agricultural sector accounts for 75% of freshwater consumption, followed by the industrial sector with 20%, and the domestic sector with 5%. The human population is anticipated to increase by 2.3 billion people between 2009 and 2050. This will give rise to an increase in demand for food, fibre, and biofuel crops; consequently putting pressure on freshwater resources between the three economic sectors. Despite only 1.5% of South Africa’s agricultural land being under irrigation, irrigated agriculture uses about 60% of freshwater resources. The contribution of agricultural irrigation to achieve food security is seen in how it contributes to 30% of grain production. Irrigation allows farmers to harvest relatively higher yields per hectare (ha) compared to rain-fed conditions. Greater yields entail more labour requirements and thus employment opportunities. It also results in higher farm revenues. The increase in the demand for freshwater will force economic sectors to compete for freshwater. Given the high level of water use seen in the agricultural sector as well as the dependence of the agricultural sector on freshwater, there is more potential for reducing water demand in the agricultural sector and great benefits from informing water users and policy makers of sustainable water use management in the agricultural sector. Maize is an important crop in South Africa, which is both imported and exported, with South Africa being a net exporter of maize. Furthermore, it is a major ingredient in broiler feed as it makes up more than 60% of broiler feed. Given the pressure to use freshwater in a sustainable manner to ensure the indefinite production of irrigated crops, a water footprint assessment (WFA) may be used as a sustainability indicator to identify whether production is sustainable. A water footprint is the volume of water used to directly and indirectly produce a product or service. It comprises three components, namely the green, blue, and grey water footprints. Internationally, a large amount of work has been published on WFAs for field crops by authors such as Aldaya and Hoekstra, (2010), Sun et al. (2013), Chapagain and Orr (2010), Hoekstra et al. (2011), and Mekonnen and Hoekstra (2010). However, very few applications have been conducted locally. These include the work of SABMiller, the World Wide Fund For Nature (WWF), Pegasys Consultants (2010), Pahlow, Snowball and Fraser (2015), Munro et al. (2015), and Scheepers (2015). The volume of scientific research is therefore insufficient to effectively guide the management of local water resources. The aim of this study was to assess the water footprint of maize and broilers as derived from irrigated maize production in the form of a case study carried out in the Bloemfontein area. This aim was attained by firstly quantifying the volumetric water footprint indicators for the production of maize and broilers as derived from maize production. Thereafter a sustainability assessment was conducted, followed by the formulation of response strategies to inform the sustainable use of freshwater. The method of the Water Footprint Network (WFN) was identified as suitable to achieve the aim and objectives of this study. The method consists of the scope of the study, water footprint accounting, sustainability assessment, and response formulation. Maize water use data were obtained from secondary data from experiments conducted by Van Rensburg et al. (2012), who collected data from the Orange-Riet Irrigation Scheme. Water use data for farm-level broiler production were obtained from a broiler-producing company. Process data were obtained from a broiler-processing company, which happened to be the same firm that produces broilers on site. At a yield level of 14.32 tonne/ha, the total maize water footprint was determined as 584.19 m3/tonne. This comprises a green water footprint of 186.92 m3/tonne, a blue water footprint of 275.58 m3/tonne, and a grey water footprint of 121.69 m3/tonne. The total broiler water footprint was detetermined as 1 474.56 m3/tonne of chicken meat produced. The water footprint of farm-level broiler production, excluding feed, is equivalent to 38.82 m3/tonne, while the water footprint associated with broiler feed was 1 430.33 m3/tonne. The slaughtering and processing of the broiler chickens used 2.70 m3/tonne each. The economic water productivity (EWP) was found to be higher for fresh chickens than for frozen chickens. Chicken portions had a higher associated EWP than whole chickens. Maize and broiler production were found to be sustainable from December to May. It is recommended that maize production in the Orange-Riet Irrigation Scheme should commence from December rather than October. Irrigation should be postponed to the later hours of the day. Optimum in-row spacing should be implemented to provide sufficient covering of the ground surface to avoid evaporation losses from the soil.
Open Access
The influence of marketing strategies on consumer loyalty for agricultural retail stores
(University of the Free State, 2017) Bogacwi, Lerato; Willemse, B. J.; Geyer, A. C.
The main focus is on agricultural retail stores and on how these stores can retain the current market share they have and improve on gaining an even bigger market share. The study focused on 12 main attributes with their main marketing strategies to achieve customer loyalty. This study alternated between a descriptive and an explorative type of research, using the qualitative method describing the agricultural sector. The structured questionnaires, comprising closed-ended questions were distributed in all the focus areas of the nine provinces of South Africa. Even though not all provinces responded this study is significant and could assist further researches with a base framework to build from or create a better framework for the implementation in the industry. The results of this study will assist cooperatives and the new-generation cooperatives, as well as agribusinesses to improve where is needed to achieve better customer loyalty and to achieve a competitive advantage. The agricultural retail stores are competing not only among themselves but also with big hyper- and superstores. Customers are moving towards the “one-stop-shop” concept where they can purchase all their goods in one place. Agricultural stores can use this to their advantage. New business opportunities like online catalogues and sending customers and members special alerts and notifications are vital as customers are now becoming more technologically minded. Keeping customers and members informed will work to the benefit of the store. Building lasting relationships through innovative memberships and social media would increase the profitability of the agricultural retail store. This study is significant to the management within cooperatives in South Africa to provide them with a model to implement and assist their individual organisations to achieve or support competitiveness.
Open Access
The impact of government support on welfare of low and middle income households in Limpopo province
(University of the Free State, 2017-07) Gadisi, Mikovhe; Ogundeji, A. A.; Owusu-Sekyere, E.
South Africa is a developing country and a developing household‘s welfare has become residualised through the restrictions of benefits which have contributed to the increase in poverty with the further elimination and relegation of different income groups. Government support in South Africa has been accepted as a policy option to improve the basic household standard of living. Government support is important for poverty elimination as it ensures a basic minimum standard of living for low and middle income households or households who are considered as poor; and contributes to achieving a more equitable income distribution in society. The study therefore analyses the impact of government support on the welfare of low and middle income households in Limpopo province. The dataset used for the study was obtained from an income and expenditure survey data conducted in 2010/2011. A sample size of 3306 households from Limpopo province was used for the study. The results show that socio-economic factors, such as age, gender, household size, educational level, employment and salary (income), together with households assets, such as television, DVD player, motorcycle, motor vehicle, washing machine, value of house, own production (inpr) and government support services such as RDP support, subsidised house, medication and social welfare (grant), are the most important features considered in household welfare. The empirical results show that low and middle income households in general are most likely to have low standards of living (welfare) due to low levels of education, large household size, and lack of employment. In addition, low income households with low levels of education are all found to be systematically associated with a low standard of living. Low income households headed by males have low welfare levels, compared to males in middle income households. The results further suggest that ownership of assets such as televisions, motor vehicles and motor cycles, have significantly negative impacts on the welfare of households in lower and middle income category. The negative impacts of these assets might be as a result of the cost associated with subscription, maintenance, fuel and other costs incurred to maintain these assets. Households that have their own production in a form of subsistence farming have improved welfare, relative to those who do not have any food production sources. Therefore, in order to improve the welfare of low income households, there is the need to encourage people to engage in subsistence farming or to have their own food production source. Concerning government support variables, results show that low and middle income households, which receive government support of free houses, subsidised houses, medication and social welfare (grants), gain welfare improvements, relative to those who did not have access to such support services. The empirical results from propensity score matching were employed to analyse the impact of real impact on various government support services for low and middle income household. The empirical finding from the average treatment on the treated (ATT) from Propensity Score Matching estimations, using nearest neighbor and Kernel-based matching algorithms, showed that the adoption of government support services exerted greater positive impact of change in the welfare of low income category households. The results generally reveal both positive and negative impacts of the various government support services on the welfare of middle income households in the study area. Different specific policy interventions are required to promote government support for change in welfare for the low and middle income categories in Limpopo province.
Open Access
Rabbit production and consumption in South Africa
(University of the Free State, 2002-11) Bashi, Molao John; Balyamujura, H. N.; Van Schalkwyk, H. D.
English: The needs, perceptions and attitudes of potential consumers and producers with regard to consumption and production of rabbit products in Moqhaka, Ngwathe and Matjhabeng local municipalities are analysed in this study. The consumers in aforementioned local municipalities consume common livestock meats such as chicken, mutton, beef and pork. The consumers prefer lean meat. Pork is the most disliked meat by the majority of the surveyed consumers due to stomach problem that it causes when consumed. Pension and casual forms of employment are common sources of income among the African households surveyed. The African and Coloured communities showed more interest in the consumption of rabbit products than the White communily. The main attribute that will encourage the African and Coloured communities to consume rabbit products is its lean meat that is suitable for heart disease patients and people who are over weight. The members of the White population will use rabbit products mainly in the form of rabbit fur apparels and manure. The 'White community showed to have more knowledge about the potential attributes of rabbit products such as meat rich in protein, low on fat, manure suitable for vegetable growing as well as the ability of rabbit fur to make clothes. Rabbit meat was subjected to sensory taste analysis in a bid to determine consumer preference and taste with regard to meat consumption. Rabbit meat was compared to chicken, mutton and beef. Mutton was the most preferred meat by the panelists. However, the differences in the rank sums were all not statistically significant to justify preference of one meat over the other. This could be attributed to the tasting panel which was selected from a broad socioeconomic background and was familiar with at least seventy five percent of the tested meat types. Some members of the tasting panel were familiar with all the meat types. The small-scale farmers in Moqhaka, Ngwathe and Matjhabeng local municipalities are currently involved in both Ianning and non-farming activities which they depend upon for survival. The farming activities include livestock and vegetable production while the non-farming activities include sewing, selling of fat cakes and so forth. The majority of producers and consumers have superficial knowledge about the potential of rabbit production and its products. The surveyed producers are faced with a number of problems such as lack of financial resources, lack of storage facilities and reliable form of transport in order to run their activities efficiently. This condition necessitates the formulation of a well co-ordinated support programme. The formulated programme would determine what form of production credit would be best suited for the rabbit producers in the different production areas. The enterprise budgets formulated indicate that the rabbit enterprise is not only a cost-effective enterprise but also profitable. This is shown by the low cost production ratio and high returns to investment when compared to other enterprises. An investigation of the international market. shows Europe as the most attractive and largest market for rabbit products.
Open Access
Taxing agriculture: an analysis of a possible land and capital gains tax
(University of the Free State, 2001-02) Dannhauser, Andries Petrus; Van Schalkwyk, Herman
English: The South African agricultural sector has experienced a lot of deregulations over the past decade. This process marked the end of state subsidies, favourable commercial agricultural policy and border control measures that, in the past, provided a safety net for commercial farmers. Together with the transformation process, various policy changes occurred and included the transformation of agricultural policy to the benefit of emerging, small and subsistence farmers. Commercial farmers lost their once held favourable position and had to adapt in a globally exposed sector with very little state support. Today, the agricultural sector is challenged with the possible introduction of two new taxes. Since 1992, a South African land tax has been under intensive investigation. This prospect gave rise to divergent opinions and arguments regarding the effect of a land tax on farm operating costs, farmland values, productivity, financing of local governments and other possible effects. During February 2000, the 30-year old possibility of a South African capital gains tax (CGT) gained momentum with the announcement by Minister Trevor Manuel that such a tax will be imposed on April 1st 2001. The past incapacity of the tax administration to handle CGT was supposedly overcome with the introduction of the New Income Tax System (NITS). SARS is confident that they can now handle the administration behind a capital gains tax. With the aim of obtaining some information with regard to the possible effects that a land tax may have, it was necessary to simulate the agricultural sector. Satisfying this need involved the use of static and dynamic linear programming techniques. Different agricultural regions in South Africa were identified for data gathering and subsequent inclusion in the analysis. Specific case studies were chosen and are situated in the Mpumalanga area, the Great Karoo area, the Olifants River irrigation scheme, Potchefstroom area, Bloemfontein area and the Kwazulu-Natal area. Various scenarios were constructed and the effect of the land tax at different rates, different land tax bases and different deductibility rates from income tax were tested. With these results at hand it was possible to provide some guidelines in terms of the effect of a land tax regarding different implementation strategies. In terms of capital gains tax, a thorough literature study indicated that CGT reduces the amount of savings and investments. It furthermore discourages investment in risk-bearing investments such as agriculture. In the CGT analyses, a case study is used to determine the effect of land and capital gains tax on the repayment ability of a farm. With the aim of obtaining some information with regard to the possible effects that a land tax may have, it was necessary to simulate the agricultural sector. Satisfying this need involved the use of static and dynamic linear programming techniques. Different agricultural regions in South Africa were identified for data gathering and subsequent inclusion in the analysis. Specific case studies were chosen and are situated in the Mpumalanga area, the Great Karoo area, the Olifants River irrigation scheme, Potchefstroom area, Bloemfontein area and the Kwazulu-Natal area. Various scenarios were constructed and the effect of the land tax at different rates, different land tax bases and different deductibility rates from income tax were tested. With these results at hand it was possible to provide some guidelines in terms of the effect of a land tax regarding different implementation strategies. If a land tax is introduced on South African agricultural land, market values for farmland would decrease, which implies lower solvency ratios. A land tax will furthermore increase overhead costs, lead to higher financial risk, and result in the production of high-income products (but also higher risk products). The demand for short-term credit will also increase. Levying a land tax simultaneously with a capital gains tax, will lead to a decline in the repayment ability of farms as well as decreases in the security value of the concerned land. The combination of these taxes will increase the risk involved in agriculture.
Open Access
A metafrontier analysis of sheep production in the N8 development corridor
(University of the Free State, 2017-06) Nyam, Yong Sebastian; Matthews, Nicolette; Bahta, Yonas T.
English: In South Africa, sheep enterprises play an important role as a source of livelihood for many farmers, especially smallholder farmers. The productivity of sheep farmers in South Africa is very low. The lack of analytical evidence on efficiency levels of smallholder sheep farmers in the different sheep production systems limits policy-making on optimal allocation of resources. In addition, these smallholder farmers are faced with numerous constraints regarding production, which is considered to be one of the many factors impeding their productivity and livelihood. Very little is known empirically about the constraints faced by these farmers and how they can be overcome. This study analysed the factors that influence the productivity of sheep production to enhance the livelihoods of smallholder sheep producers in the N8 development corridor and to identify and rank the constraints faced by smallholder sheep farmers along the N8 development corridor. Data for this study was collected with the use of structured questionnaires. A sample size of 217 smallholder sheep farmers comprising 157 from Thaba Nchu and 60 from Botshabelo was used. The stochastic metafrontier model was used to estimate technical efficiency and technology gaps across the different farms in the study areas. The Kendall’s coefficient of concordance was used to identify and rank the constraints faced by smallholder farmers. The empirical results of the study revealed that farmers in both Thaba Nchu and Botshabelo are technically inefficient. The empirical results show that herd size and feed cost had significant positive effects on sheep output in Thaba Nchu municipal district, indicating that these variables are vital for enhancing sheep production in Thaba Nchu. However, land size and sheep loss were found to have a significant negative effect on sheep output in Thaba Nchu. The negative effect of land size on sheep output was completely unexpected. It is assumed that these farmers have relatively small herds, and increasing land size will only add to the cost of managing the land. On the other hand, land and transport costs had significant positive effects on sheep output Botshabelo, indicating that these inputs are vital to enhancing sheep production in this district municipality. Sheep loss had the expected significant negative effect on sheep production in Botshabelo. In the pooled sample, herd size, feed cost and labour were found to have significant positive effects on sheep production in the study areas. However, land size and sheep loss were found to have a significant negative effect on sheep output in the pooled sample. The gamma value of 0.679 means that about 67.9% of the variation in sheep output in Thaba Nchu is explained by technical inefficiency, while 32.10% of the variation is due to random shocks and statistical noise. For Botshabelo, the gamma value (0.779) was relatively higher than in Thaba Nchu, indicating that the effects of inefficiency on variation of the sheep output is far larger than that of random shocks. The pooled sample had a gamma value of 0.799. This means that 79.9% of the variation in sheep production in the study areas is due to inefficiency and 11.1% is due to random shocks. The variation in sheep production for the study areas is generally due to technical inefficiency on the part of the sheep farmers. The stochastic production frontier analysis showed that the average technical efficiency of Thaba Nchu farmers was 67.3% and 65.7% for farmers in Botshabelo. This result indicates that there is 32.7% potential for Thaba Nchu farmers to expand their production by operating at full technical efficiency level, while the scope for Botshabelo to increase the level of efficiency using available farm resources and technologies is about 34.3%. The variables that influence the technical efficiency level of Thaba Nchu farmers are indigenous sheep breed, education level, veterinary services and market distance. Indigenous sheep and market distance had a significant negative effect on technical efficiency in Botshabelo while farm experience and crossbreeding method had significant positive effects on technical inefficiency. Theft, lack of capital, diseases and parasite were found to be the most severe constraints facing the sheep farmers. The average technical efficiency scores estimated relative to the metafrontier (TEm) for Thaba Nchu was 0.495 while for Botshabelo was 0.442. The results indicate further that a regional production frontier is necessary to advise farmers in each district on ways to improve the productivity and efficiency of sheep production. It can be concluded from the results of the study that farmers in the study area are producing well below the production frontier. This means that farmers have the potential to increase their productivity and efficiency in order to produce at full capacity. The policy recommendation arising from this study is that farmers should be trained on proper farm management techniques and that proper market channels should be developed for farmers to sell their products. Building new fences and improving old ones will help prevent theft and will increase sheep outputs.
Open Access
Water footprint of wheat and derived wheat products in South Africa
(University of the Free State, 2017-02) Mohlotsane, M. P.; Jordaan, H.; Owusu-Sekyere, E.
The main objective of this study was to assess the water footprint of wheat in South Africa, an important input in the wheat-bread value chain. The water footprint of flour, and that of bread, was calculated to determine the total water footprint of bread along the wheat-bread value chain in South Africa. Water productivities at each stage of production within the wheat-bread value chain were also determined. The study was conducted as a case study of the Vaalharts region. Farm-level data were obtained from Van Rensburg et al. (2012). A commercial processor with both a mill and bakery was used for collecting data at the processing level of the value chain. Water footprint assessment (WFA) is emerging as an important sustainability indicator in the agricultural sector. The water footprint concept takes a consumptive perspective to freshwater use that links production to final consumption by consumers. This study employed the Global Water Footprint Network Standard approach (GWFNS) to calculating the volumetric blue and green water footprint along the wheat-bread value chain. The GWFS considers three different types of water: blue water, which is all the surface and groundwater consumed along the value chain; green water, which is rainwater that does not become runoff; and grey water, which is the volume of freshwater required to assimilate pollutants to ambient levels. The results indicate that the water footprint indicator for wheat production at Vaalharts was 991.12 m3.tonne-1; of this 788.01 m3.tonne-1 originates from surface water and groundwater (blue water footprint) and 203.12 m3.tonne-1 from effective rainfall (green water footprint). The water footprint of flour and bread was 0.073 m3.tonne-1 and 0.459 m3.tonne-1 respectively. The total water footprint of the processing stage was 0.532 m3.tonne-1. The total water footprint of bread along the wheat-bread value chain was 991.84 m3.tonne-1, which is a combination of farm-level (wheat) and processing (mill and bakery) data. The water productivity assessment followed the water footprint assessment, where the value added to water was quantified along the wheat-bread value chain. This was achieved by calculating the economic water productivity (EWP) of wheat, flour, and bread, followed by the value added by the water footprint of wheat, flour, and bread along the wheat-bread value chain. The EWP of wheat, flour, and bread was 4.18ZAR.m3, 0.079ZAR.m3, and 0.038ZAR.m3 respectively. Value added by the water footprint of this value chain was 11.52ZAR.m3, which consisted of 4.0ZAR.m3 value added from the farm level and 7.49ZAR.m3 from the processing level. The total water footprint of wheat in Vaalharts is 61% lower than the global average. Approximately 79% of the water footprint of wheat was from absorbed surface and groundwater (irrigated water), which indicates a high dependency on surface and groundwater for wheat production in the Vaalharts region. Effective rainfall contributed only 21% of the total water footprint, which leaves room for possible increased usage. At the processing stage, 86% of the total water footprint in the processing stage of bread along the wheat-bread value chain was from the bakery and only 14% from the milling process. It is concluded that the amount of water used at farm level is the largest contributor to the total water footprint of bread along the wheat-bread value chain (99.95%), while processing is only accountable for 0.056%. For economic productivities, more income is generated per cubic metre of water used from wheat than any other product along the wheat-bread value chain. Due to the high contribution of wheat in this value chain, it is a conclusion that is easily understood. Value added to water encompasses the value added to the product throughout its value chain (in monetary terms) multiplied with the water footprint of the product at different nodes of production throughout the product’s value chain. Total value added to water from the water footprint assessment of the wheat-bread value chain is ZAR11.43 per kilogram. About 65% of this value is from the processing level and only 35% from farm level. This means higher income is received per cubic metre of water used in the processing level of the wheat-bread value chain than from the farm level. The result is similar to the value added per cubic metre of the water footprint of bread along the wheat-bread value chain. Despite the fact that the water footprint of wheat along the wheat-bread value chain contributes 99.95% of the overall footprint in this value chain, the income received per cubic metre of water footprint used for wheat along this value chain is only 35% (4.0ZAR.m3) of value added to the value chain.
Open Access
Risk efficiency of optimal water allocation within a single and multi-stage decision-making framework
(University of the Free State, 2017-04) Madende, Primrose; Grové, B
The main objective of this research was to compare the results obtained from modelling irrigation water allocation decisions within a single-stage decision-making framework with the results obtained within a multi-stage sequential decision-making framework under a full water quota and a restricted water quota. A unified irrigation decision-making framework was developed to model the impact of the interaction between water availability, irrigation area and irrigation scheduling decisions as multi-stage sequential decisions on gross margin variability. An Excel ® risk simulation model that utilises evolutionary algorithms embedded in Excel® based on the Soil Water Irrigation Planning and Energy management (SWIP-E) programming model was developed and applied to optimise irrigation water use. The model facilitates the simulation of the economic consequences resulting from changes to the key decision variables that need to be optimised through gross margin calculations for each state of nature. Risk enters the simulation model as crop yield risk through different potential crop yields in each state of nature and stochastic weather which determines irrigation management decisions. Water budget calculations were replicated to include 12 states of nature within a crop rotation system of maize and wheat. The risk simulation model was applied in Douglas, a typical location of an irrigation farm. The results showed improved risk management within a multi-stage decision-making framework as indicated by higher gross margins and reduced variability due to improved irrigation scheduling decisions under both a full and restricted water quota scenario. Close to potential yields, if not full potential yields were achieved within both decision-making frameworks. However, a significant reduction in per state irrigation water use resulted within a multi-stage decision-making framework sequentially resulting in improved gross margins. A full irrigation strategy with reduced areas was followed under a restricted water quota with reduced gross margins resulting owing to lower gross incomes. The resulting impact of risk aversion on gross margin risk was insignificant within a multi-stage decision-making framework, whilst a more evident impact within a single-stage decision-making framework was indicated by a significant increase in minimum gross margins. The resulting monetary value of modelling irrigation decision within a multi-stage sequential decision-making framework was R11 149 and R14 413 under a full and restricted water quota respectively for a risk averse decision-maker. The resulting value of a multi-stage decision-making framework assuming risk neutrality was significantly lower at R4 261 and R7 019 for a full and restricted water quota respectively. Results indicate that the interaction between different decisions made at different times during the growing season as represented with a multi-stage decision-making framework, becomes much more important under restricted water supply conditions taking risk aversion into account. The cost of a water restriction within a single-stage and multi-stage decision-making framework of R218 319 and R215 561 respectively resulted under a risk neutral framework. Under risk aversion, a slightly lower cost of a water restriction of R212 513 and R209 249 was generated within a single-stage and a multi-stage decision-making framework respectively. The lower costs for a water restriction within a risk framework owes to the fact that risk averse decision-makers already make conservative decisions hence a water restriction will have a relatively limited impact on such a decision-maker. The overall conclusion is that, ignoring modelling irrigation decisions as sequential decisions within a multi-stage decision-making framework overlooks the risk reducing impact of the true nature of irrigation decisions. As a result, water use dynamics are not explicitly accounted for with the gross margin risk and the value of a water restriction over-estimated. The main recommendation from this research is hence that, agricultural water allocation policies should be formulated based on crop water optimisation models that consider the multi-stage decision-making framework within which irrigation decisions are made to ensure that the impact of any given policy on water use management is not over-estimated. Further research should focus on testing the global optimality of the solutions of the risk model with alternative evolutionary algorithm techniques and also reformulation of the model within a mathematical programming environment.
Open Access
Agricultural credit models: identifying high risk applications
(University of the Free State, 2017) Bougard, Dominique Alyssa; Henning, J. I. F.; Jordaan, H.
The objective of the research was to explore the performance of various statistical credit-scoring models, in order to identify a model that will minimise the misclassification of high-risk applicants, and identify the characteristics that influence repayment ability. The study was conducted in South Africa, with the use of a case study of a South African financial organisation serving the agricultural sector. The data gathered for this study was gathered through a formal agreement with a commercial financial organisation. Logistic regression (LR), probit analysis (PA) and neural network (NN) were used to construct the credit-scoring models that can be used to classify credit applications in the agricultural sector. Results of the LR indicate significance at 10% of the following variables, which may have an impact on classification: medium-term loan, credit history, debt to assets (DTA), net farm ratio, diverse 2, high risk, ownership and experience. The PA results demonstrate the following variables at 10% significance: credit history, DTA, net farm ratio, diverse 2, ownership and experience. The identification of characteristics provides confirmation of characteristics that are of importance to credit research. Financial organisations can use the identification of important characteristics as a method to provide guidance to applicants who apply for loans. Doing so will ensure that the organisation will identify characteristics that ensure that the applicant is accepted by the financial organisation. Applicants for loans can ensure that they possess characteristics that correspond to important characteristics identified by the statistical model. The results from the NN are not easily interpretable; due to “black-box” qualities it was not easy to identify the variables that have an influence on the predicted outcome. The NN did, however, outperform the LR and PA in terms of classification accuracy. Neural networks achieved the highest correctly predicted overall accuracy and a lower percentage of Type II error classifications. Logistic regression and PA have overall classification percentages of 96.06% and 3.94% respectively for classifying Type II errors. The NN had an overall classification accuracy of 98.43% and Type II classification error of 1.54%. The main conclusion from this research is that the statistical methods are able to classify credit applications in the agricultural sector and have the ability to improve accuracy in correctly classifying agricultural applicants. Further research is need to ensure that the correct variables are included in the classification. The classification results of the models are tested and monitored over a period of time to ensure that the accuracy and prediction are acceptable according to the financial organisations. Further research is needed to select the correct variables to be used when supplying credit to smallholder farmers and financial organisations can use the identified important characteristics to provide recommendations and guidance when evaluating applications for loans. Credit applicants can also use these identified important characteristics as a point of reference before applying for the loan at the financial organisation.
Open Access
Economic impact of climate change on milk production: a case study of selected areas in the Free State
(University of the Free State, 2017-03) Lakew, Hermela; Ogundeji, A. A.; Tesfuhuney, W.; Lombard, W. A.
Dairy cows are sensitive to increasing temperature and humidity, which affects their feed intake, and causes a direct as well as an indirect impact on milk production. This study aimed at computing the economic impact of climate change-induced heat stress on milk production in the Free State, South Africa. The semi-arid regions of Free State – Bloemfontein, Bothaville and Bethlehem – were selected as representative regions, based on availability of climate data. In this current study, a model developed by - St-Pierre, Cobanov and Schnitkey (2003) was adopted in order to estimate the milk production losses for all representative study areas. The baseline (1950–1999) and mid-century (2040–2070) climate data as well as Temperature Humidity Index thresholds (THIthershold), 70 and 65, were used. Taking present time prices, it was found that with a THIthreshold of 70 for Bloemfontein, Bothaville and Bethlehem, a loss of 17 cents, 16 cents and 2 cents, respectively, per cow each day, on average was incurred. Thus, taking the average number of cows in the Free State (Lacto data, 2015) as an example, a farmer would lose about ZAR8 687.00 in a year, on average. While, for a THIthreshold of 65, milk production loss showed an increase amounting to 60, 50 and 17 cents per cow/day, on average, for Bloemfontein, Bothaville and Bethlehem, respectively. For the mid-century 2050s data with a THIthreshold of 70, and no mitigation strategies being employed by farmers, milk production loss doubled for all the three study areas. To understand dairy farmers’ perceptions on climate change-induced heat stressed, a semi-structured questionnaire was used for Bloemfontein as a sample region. Farmers responded that increasing temperature and variability of rainfall as comprising one of the reasons for their lower milk production. However, this awareness is not consistent with the fact that almost all interviewed farmers employ no measures to adapt to the increased heat, nor do they use any measures to mitigate heat stress. Using a model applied by St-Pierre, Cobanov and Schnitkey (2003), this paper computed milk production loss when farmers employ moderate heat abatement strategies (wetting and forced ventilation) for the mid-century climate data (2040–2070). It was found that production loss per cow reduced by more than 50 % and consequently lowered revenue losses for farmers. It is recommended that exhaustive analysis of the economic impacts of climate change-induced heat stress on milk production should be done, as it is an important sector in alleviating household food insecurity in South Africa.
Open Access
Framework for a voluntary traceability system for beef
(University of the Free State, 2016-12) Calitz, Petronella Anne; Willemse, B. J.
In recent years, food safety and food quality have become important issues in the global beef industry. Traceability can be seen as an important tool for ensuring safety and quality of beef products. Consumers have also become more aware of what they buy and they require more information on the origin of foods. These are the main reasons why traceability is a requirement for all beef imported into countries and regions such as Australia, Japan, South Korea and the European Union states. Although there are African countries with mandatory traceability systems (Namibia and Botswana), South Africa does not have such a system in place and is therefore excluded from exporting beef products to certain markets. The main aim of this study was to establish a framework for a voluntary beef traceability system for South Africa that complies with all international standards and the requirements of countries which require traceability of beef imports. The objectives of this study were to a) get clarification of an ideal traceability system that meets international standards, b) assess of the current South African laws and the classification system and ascertain how it can assist in traceability implementation, and lastly c) propose a framework for a farm to fork beef traceability system for South Africa. An in-depth review was done on the current status of beef traceability in the world, as seen in Article 1. This study included the current systems implemented by some of the biggest importing and exporting countries and economic unions in the world, which included Brazil, Australia, EU states and Japan, to only name a few. Traceability standards were also studied to gain a good understanding of what the requirements are for a globally acceptable traceability system. The three well-known conceptual frameworks were also included in this part of the study and included the CTE and KDE framework, Food Track and Trace Ontology, and lastly the TraceFood Framework. Thereafter, the existing traceability systems were divided into three levels according to depth, breadth and precision. In this part of the study, the current status of traceability in the South African beef industry in relation to other beef producing countries and economic union is also briefly discussed. The next step in this study was to establish a traceability system using the CTE and KDE framework. It was important to establish the CTEs and KDEs for each of the role-players in the value chain to ensure the link from live to final product is not broken. After the framework for each role-player was established, a few benefits were also identified for the adoption of this framework. It was important to ensure that this framework would take all global, as well as South African, laws and regulations into account. The results of this study are that a framework for a voluntary beef traceability system can be established. By adopting this framework, all participants will have access to the same benefits as those in countries with mandatory traceability systems. This voluntary traceability system can also form part of a pilot study for a mandatory traceability system for the South African beef industry.
Open Access
Econometric estimation of the demand for meat in Namibia
(University of the Free State, 2017-02) Andjamba, Hiltrudis N.; Geyer, A.; Ogundeji, A. A.
This study estimated the Rotterdam and the LA/AIDS model with the reason to determine an appropriate model for Namibian meat products. The data used in the study are prices and quantity demanded for Namibian meat products, such as beef, mutton, pork and chicken, for the period from January 2001 to December 2013. The data were analysed using Eview 7 by Seemingly Unrelated Regression Estimation (RSURE) method that produces four separate equations, namely beef, mutton, pork and chicken equations. The data used in predicting both models were first tested to determine whether they are stationary. As a result, the data employed were integrated of order one (I(1)). The parameters of the models were estimated using the RSURE method. The econometric restrictions, such as homogeneity and asymmetry, were imposed during the estimation of both the models. Because the mutton equation was dropped during the regression process, the adding-up restriction was used to recover the parameters for the mutton in both the models. As for the Rotterdam model, the system R2 for the Rotterdam modes is 19.1 per cent. All expenditure coefficients are positive, which is in line with the a priori expectations. With the exception of chicken, the expenditure coefficients for beef (0.007), pork (0.014 and mutton (0.027) are very close to zero, implying that these products are normal goods. The beef share equation further indicates that an increase in the price of chicken (-0.004), pork (-0.003) and mutton (-0.007) reduces their share in the budget because consumers prefer to spend their income on beef. Unlike the Rotterdam model, all three sets of restrictions in the LA/AIDS model were satisfied during the regression. Nine out of twelve estimated parameters are statistically significant at one per cent level of confidence. One is significant at ten per cent level of significance, while only two parameters are insignificant. The system R2 (39.4) for the LA/AIDS model is higher than that of the Rotterdam model. The estimated expenditure elasticities for beef, chicken, pork and mutton are 0.60, 1.46, 0.41 and 1.06, respectively. Beef and pork are relatively inelastic, while chicken is more elastic than mutton is. The expenditure elasticity result for the LA/AIDS model implies that chicken and mutton are regarded as luxury products, while beef and pork are normal goods in the Namibian purchasing basket. Based on the performance of the two models on Namibian meat data, the LA/AIDS model, compared with the Rotterdam model, performed better in terms of the model’s ability to meet the econometric restrictions of homogeneity and asymmetry, the highest adjusted R2, and the results that are in conformity with the a priori expectation in terms of compensated own-price and cross-price elasticities. It is therefore concluded that the LA/AIDS models are a better fit for the Namibian meat data.
Open Access
Equity in natural resource use : farm land resource utilization and land value trends in the Free State under LRAD
(University of the Free State, 2008-05) Kotze, Leon; Jooste, A.; Laubscher, J. M.
English: The demand for land as an economic asset represents a source of identity and a symbol of citizenship in South Africa. This symbol has become an important factor, guiding policy development. South Africa's current ownership and use of agricultural land is the inevitable outcome of decades of policies favouring white commercial farmers. The need for land reform was clearly identified in the new South African Constitution (Act 108 of 1996, Section 25). In the process of redistribution of land to previously disadvantaged communities in primary agriculture in South Africa, it is vitally important that issues such as the productivity of the land and infrastructure on farms are considered since not only do it affect the income potential of the land, but also the value of the land, which is in turn important to, for example, gain access to credit. The primary objective of this study was to provide a clear picture of equity in agricultural resource use in the Free State Province (FSP). This study shows that there are currently no proper systems in place to monitor the ongoing process of land reform in the FSP. There are no apparent correlation between land prices and the potential of the resources in the FSP when investigated on an aggregate level. There is also a poor correlation between different sources that provide information on land prices. This situation renders it very difficult to make specific conclusions on the equity in natural resource use. It was furthermore shown that records being kept by Land Affairs Offices are in general incomplete to the extent that such records could potentially provide a skew picture of the current progress being made by the land reform programme. These problems and shortcomings of the data available to measure the progress made in redistribution of land and resources led to the development of a hedonic pricing model that attempts to isolate the transaction characteristics that have the most significant impact on the price paid for land under LRAD in the FSP. The hedonic model shows that Rent, Size, Location of the land and the Type of enterprise significantly affected the price paid for land. The analysis also reveals that the current aggregate information on Land Capability is not optimally suited to link farm prices to the potential income the farm can generate. Rental values of land will serve this purpose much better. Finally, the results obtained from this study provided no evidence that land transferred were only in areas of low quality resources nor that such land was overpriced.
Open Access
An economic evaluation of crop rotation systems under centre pivot irrigation in the Southern Free State sub-area
(University of the Free State, 1992-11) Den Braanker, Johan Pieter Diederick; Oosthuizen, L. K.
English: The lack of sufficient and accurate knowledge of the effect of alternative crop rotation systems on economic profitability and financial feasibility for irrigation farming indicates that farmers purchase mechanisation systems and plant successive crops without having determined the effect of these actions on long term farm profitability and feasibility. The importance of the study is reflected by the large numbers of irrigation farmers and the relatively large number of farmers having a high debt to asset ratio. The study is done in the irrigation area below the P.K. le Roux Dam but can also be applied to other irrigation areas without the need for structural changes. The objective of this study is to determine the economic profitability and financial feasibility of alternative crop rotation systems in the research area, taking into consideration price, production and financial risks. The lack of comparable and accurate information on crop yield and gross water requirements over a lengthy period necessitated these values to be simulated. Data on crops, soils and climate are used to validate and calibrate the PUTU crop growth simulation model P9MZAB3 for this area. The BEWAB irrigation scheduling model is .used to determine the irrigation scheduling of the crops. The calibrated PUTU model then is used to generate the crop yields and .gross water requirements for wheat, late maize, cotton, peanuts, dry beans, lucerne and soyabeans for a period of eleven consecutive years . Selected farmers in this area provided the data on crops and crop rotation systems. Based on economic, agronomic and practical principles, fourteen alternative crop rotation systems are developed. For each typical crop rotation system an appropriate mechanisation system, which includes a centre pivot irrigation system, is developed. The crop rotation systems are evaluated to run over a period of ten years. The irrigation systems are used to irrigate an area of sixty hectares with a predominantly sandy soil. Depending on the crop rotation system various land utilisation percentages (degree of double cropping) are considered. The systems are used to irrigate areas with two different pumping heights: +10 m (Sarel Hayward canal) and -15 m (Ramah area). The simulated gross water requirements of the crop rotation systems are calculated and compared for the ten-year period to the available water quota. The results indicate that the maximum water quota of 900 000 m3 is sufficient in satisfying the gross water requirements of the follbwing crop rotation systems: 45W45LM15P (The number refers to the number of hectares while the symbols are explained as W = Wheat, LM = Late Maize, P = Peanuts, L = Lucerne, S =:= Soyabeans and C = Cotton) 30W30S30L, 30W30LM30L 30W30S30LM30L 30W30LM30C30L 30W30S30C30L Price risk is the result of crop prices that change over time. For late maize and wheat price scenarios are determined. By using linear regression analysis on the basis of historical national production levels of these crops, equivalent 1990 adjusted national production levels and prices are calculated. The prices of dry beans and lucerne hay are subject to price variability and determined largely by supply and demand situations. A procedure, is followed to generate a distribution of prices for these two crops that takes the price variability into consideration. For soyabeans, cotton and peanuts no quantifiable price risk is assumed and subsequently predetermined fixed prices are used. By using an irrigation system cost calculation method the fixed, variable and marginal irrigation system costs are calculated for the two systems with different pumping heights. On the basis of the supplied data on crops, mechanisation costs and determined average crop prices and yields, the crop budgets are developed and the net margins calculated. The crop net margins are the basis on which the different crops are analysed for economic profitability. For the consideration of production and price risks the net margins of the crops in the budgets are calculated for each year of. the ten-year period on the basis of randomly selected crop prices and yields from the respecti ve price and yield distributions. This process is repeated twenty times to obtain a distribution of twenty net margins for ten years for each crop. The net present value method is used to calculate the economic profitability of the crop rotation systems. By including in the calculation the distributions of the determined net margins the production and price risks are taken into consideration. On the basis of the net present values and ratios of net present values to investment the economic profitability of the crop rotation systems can be evaluated on an equal basis. The results indicate that crop rotation systems with late maize and/or soyabeans as the main summer crops are the least profitable, while crop rotation systems with lucerne and cotton as the main summer crqps are the most profitable. The results also indicate that crop rotation system irrigated by the systems with higher pumping heights have a considerably lower economic profitability. In the financial feasibility analysis the crop rotation systems are analysed for a hypothetical farm for cash deficits for the ten-year period by comparing basically the cash incomes with the cash costs (financial obligations). On the hypothetical farm two sixty-hectare areas are irrigated and only the associated revenues and costs are considered. In the financial feasibility analysis the financial risks are firstly incorporated by including the distribution of net margins and secondly by using three different debt to asset ratios. The annual cash costs are calculated for each year for the ten-year period and for each debt to asset ratio. The annual cash incomes are calculated from the crop net margins minus the non-cash fixed costs for each year for the ten-year period. A decision rule is implemented to determine. when a crop rotation system is feasible. The results indicate that the debt to asset ratio is the main factor influencing financial feasibility of the crop rotation systems. For a 70/30 debt to asset ratio all crop rotation systems are unfeasible for the irrigation systems with a positive pumping height (+10 m) and unfeasible, except one (30W30S30C30L), for the negative pumping height (-15m). For a 50/50 debt to asset ratio only five crop rotation systems are feasible for irrigation systems with positive and negative pumping heights (30W30S30L; 30W30S30LM30L; 30W30LM30L; 30W30LM30C30L; 30W30S30C30L). For a 20/80 debt to asset ratio all crop rotations systems except one (60W60LM) are feasible for both pumping heights. The conclusion is that the debt to asset ratio is more important in obtaining financial feasibility than the choice of the crop rotation system and the given crops.
Open Access
Optimal allocation of water resource in irrigated farming at the Ramah Canal Vanderkloof Dam
(University of the Free State, 2002-12) Mahlaha, Jacinta Mamaleke; Nwonwu, F. O. C.; Viljoen, M. F.
The flood plain in the Orange River at Vanderkloof Dam is classified as semi-arid. Natural rainfall in the area is very low and cannot support crop production. Therefore, the feasible way of producing crops is through irrigation. Agriculture must be prepared to respond to limited water by becoming efficient in water use. Increase in efficiency requires that the demand and supply management by individual water users be optimised and the value of water derived as measures to achieve efficiency in water use. The first part of the study involved a survey conducted at the Ramah Canal to ascertain the current farming situation and to determine whether economies of size existed in the area. Irrigated farms in the area were classified based on irrigation water rights into three average farm sizes of 75, 180 and 240 ha. Income and balance sheet statements were compiled to determine the financial situation of the three farm groups. From the statements, different financial ratios including solvency, liquidity, profitability and efficiency were calculated. The financial analysis showed that 180 ha farm group had the best solvency, liquidity, profitability and efficiency ratios. In the second position was 240 ha farm group. The analysis indicated that economies of size exists between farm groups with 180 ha farm being the optimal farm size to operate and 75 ha being the least efficient farm group. In the second part of the study, optimal cropping mixes at the Ramah Canal were determined under constrained and unconstrained irrigation water supply. Five crop mixes were formulated for each farm group. Crops under investigation were maize, wheat, lucerne, groundnuts, cotton and potatoes. A Linear Programming (LP) model was developed to determine optimal cropping mix that gives maximum returns under unconstrained water supply (100 percent). The objective function of the model was to maximise total gross margin subject to the following constraints: total available water and land during summer and winter seasons, maximum area under each crop, labour and tractor power required by the crop mixes. From the LP results, the total value product (IVP) functions presented as linear segments showing gross margin as a function of water applied were developed for each crop mix. The TVP functions indicated the sequence by which crops would be irrigated based on their contribution in maximising gross margin. Results showed that in summer season, potatoes would be irrigated first because of high profitability relative to other crops. As irrigation water becomes abundant, groundnuts, cotton, lucerne and maize will be irrigated in that order. Wheat was the only winter crop dealt with. From the TVP functions, Marginal Value Product (MVP) for water was derived. The MVPs were RO.09, RO.18, RO.25, RO.38, RO.39 and R3.64 for maize, lucerne, cotton, groundnuts, wheat and potatoes, respectively. Sensitivity analysis was carried out by reducing the full water application level to 75, 50 and 25 per cent water availability to determine the response of different crop mixes under restricted irrigation water supply. Results showed that in summer season, maize is the first to be affected by water limitations. Next is lucerne, then cotton, and groundnuts. Potatoes are the last to be affected by water restrictions. Furthermore, under severe water restrictions, farmers could lose more than half of their potential income. Water" management strategies which farmers would follow in future when irrigation water is limited were determined. Farmers in 75 and 180 ha groups indicated that they would completely change crop mix under severe water restrictions. Farmers in the 240 ha group with lots of farm investments, are very sensitive to reductions in water supply and are prepared to quit farming if water limitation persists. In conclusion, the study provided information and guidelines for choosing the best cropping strategies based on available irrigation water and other production resources. It is recommended that the study be done for a reasonable period of time since production is a continuous process. Furthermore, the potential of the area in producing high value crops should be investigated.
Open Access
'n Ekonomiese evaluasie van sommige gewasopvolgingstelsels onder droëlandtoestande in die Middel-Vrystaat
(University of the Free State, 1985-01) Grobbelaar, Jan Adriaan; Blignaut, C. S.; De Jager, J. M.; Human, J. J.
Afrikaans: Gewasprodusente in die Middel-Vrystaat het gevind dat die inskakeling van 'n somergewas in bestaande wintergewasproduksiestelsels, met gepaardgaande langer braakperiodes, aanleiding gee tot verhoogde graanopbrengste en 'n vermindering in onkruidprobleme en wortelsiektes. Hierdie bevindinge het daartoe aanleiding gegee dat vrae by die gewasprodusent ontstaan het rondom die ekonomiese geregverdigheid van wisselbou- en braaklandstelseis. Die doel van hierdie studie was om ten spyte van 'n gebrek aan plaaslike navorsingsresultate, die voordele en nadele van wisselbou- en braaklandstelsels, soos gereflekteer deur langtermynwinsgewendheid, teenoor die van monokultuurverbouing op te weeg en om in die proses die mees ekonomiese stelsel te identifiseer. Vir hierdie doel is 'n hipotetiese boerdery-eenheid in die ondersoekgebied gekonstrueer. Die gewasopbrengste van koring en mielies is met behulp van gewasgroeimodelle bereken op basis van die daaglikse klimaatsomstandighede in die gebied vir die tydperk 1960 tot 1983. Daar is bevind dat koringopbrengs op braaklande gemiddeld 76% hoër as die by monokultuurkoring was, met 'n koêffisiênt van variasie van 19,6 % teenoor die 51,9 % van monokultuurkoring. Braaklandmielieopbrengste was 30% hoër as die van monokultuurmielies, met 'n koëffisiënt van variasie van 49,7% by albei. Ses verskillende gewasopvolgingstelsels is geëvalueer, naamlik monokultuurkoring, monokultuurmielies, langbraakkoring, koring-koring-Iangbraak, koring-mielie-wisselbou en koring-koring-mielie-wisselbou. Deur die wins van die boerdery-eenheid vir elke stelsel te bereken, is bepaal dat dit essensieel is om 'n ekonomiese evaluasie van gewasopvolgingstelsels tot op boerderywinsvlak deur te voer, aangesien alle koste-aspekte waarin verskille kan voorkom, nie op bruto marge- en netto inkomste-vlak in ag geneem kan word nie. So is daar bevind dat die stelsel met die laagste bruto boerderyproduksiewaarde die derde hoogste marge bo veranderlike koste en die tweede hoogste boerderywins op grond van gemiddelde opbrengs gehad het. Die koring-mielie-wisselboustelsel het die hoogste boerderywins getoon. Deur jaarlikse boerderywinssyfers oor die 24-jaartermyn te bereken, is bevind dat dit belangrik is om so 'n evaluasie nie net op gemiddeldes te baseer nie. Die monokultuurstelseIs, met die laagste gemiddelde winssyfers, het in minstens 7 van die 24 jaar die hoogste boerderywins gehad. Die stelsel met die hoogste gemiddelde winssyfer het in 3 van die 24 jaar 'n verlies getoon, terwyl die langbraakkoringstelsel in geen jaar 'n verlies getoon het nie. Deur jaarlikse absolute boerderywinssyfers met behulp van prysindekse te bereken, is bevind dat 'n ekonomiese evaluasie met konstante pryse aanleiding kan gee tot 'n verkeerde besluit. Die verhouding tussen die pryse van koring, mielies, boerderybenodigdhede en verbruikersitems het gedurende die 24-jaartermyn sodanig verander dat 'n bepaling van die absolute huidige waarde van die jaarlikse boerdery- winssyfers getoon het dat die langbraakkoringstelsel of die langtermyn meer winsgewend as die koring-mielie-wisselboustelsel was. Omdat bogenoemde boerderywinsberekenings slegs die vaste koste voortspruitend uit die belegging in losgoedkapitaalitems en nie die verskil in die jaarlikse gebruik en gepaardgaande vervangingskoerse in ag geneem het nie, is die interne opbrengskoers van elke gewasopvolgingstelsel op basis van hierdie berekening het die winsgewendheidsvolgorde op basis van absolute boerderywinssyfers bevestig, alhoewel die verhouding tussen die onderskeie stelsels verander het. Hierdie berekening kan dus ook 'n verandering in die winsgewendheidsrangorde van gewasopvolgingstelsels teweeg bring, wat nader aan die kol as enige van die vorige berekenings sal wees. In die laaste instansie is die risiko van elke stelsel in terme van die waarskynlikheid om in 'n bepaalde jaar nie in staat te wees om die vaste verpligtinge van die boerdery-eenheid na te kom nie, bereken. Hierdie waarskynlikheid was 11,3% by die langbraakkoringstelsel en 22,8% by die koring- mielie-wisselboustelsel, teenoor die 54,2% van monokultuur- mielies en die 47,7% van monokultuurkoring.