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Stellenbosch University (2019)

A financial analysis of agricultural production systems in the Warm Bokkeveld

De la Porte, Michael

Titre : A financial analysis of agricultural production systems in the Warm Bokkeveld

Auteur : De la Porte, Michael

Université de soutenance : Stellenbosch University

Grade : Master of Agricultural Sciences 2019

The South African deciduous fruit industry is a large source of trade income and a major employer of the country’s labour force. The majority of the industry is situated in the Western Cape, a province that has a typical Mediterranean climate. The Warm- and Koue Bokkeveld are the two regions contributing the largest percentage of pome and stone fruit production in the Western Cape. The Warm Bokkeveld accumulates less cold units throughout the winter period and as a result has lower fruit quality and yields in comparison with the Koue Bokkeveld. The above described phenomenon is known as delayed foliation. Low-chill apple cultivars were bred to overcome the issue of delayed foliation. These apples can be cultivated in areas that accumulate less cold units during winter periods. Currently they are only produced in the Mookgophong area in Limpopo. The orchards are in their third year of production, but the results so far are extremely promising. The Warm Bokkeveld was identified as a region where producers could stand to greatly increase their profitability by cultivating low-chill apples. Thus far the financial implications of incorporating low-chill apples into a farming system are unknown. Therefore, this study sets out to determine the financial implications of cultivating low-chill apples in the Warm Bokkeveld. Farms are extremely complex systems that consist of multiple interrelated components. To accurately model a farming system, a systems approach is required. A whole-farm budgeting model was developed to assess the financial performance of various farming systems in the Warm Bokkeveld. To accurately model farming systems in the Warm Bokkeveld, a typical farm that represents the producers in a homogenous area was established. The typical farm and budgeting model were constructed through personal communication with a multi-disciplinary group of experts. Two farming systems were constructed and evaluated. The first farming system consisted of a typical farm that represents current producers in the Warm Bokkeveld. The second farming system was the same typical farm, but low-chill apples had been incorporated into the farming system. The Internal Rate of Return (IRR) and Net Present Value (NPV) were used to compare the profitability of the two farming systems. Based on the profitability criteria, a farming system that includes low-chill apples is considerably more profitable than the standard farming system in the Warm Bokkeveld. The higher profitability of farming system two is directly attributed to the performance of low-chill apples. To account for possible variations in the performance of low-chill apples, a sensitivity analysis was conducted where the price and yield levels of low-chill apples were altered, and the respective IRRs were calculated. The result of the analysis indicate that the yield would have to drop with 50% and the price level with more than 50%, for farming system one to be more profitable. Hence, the cultivation of low-chill apples can greatly contribute to the profitability of producers in the Warm Bokkeveld.


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