An analysis of financial implications of switching between crop production systems in Middle Swartland

Makhuvha, Mmbengeni Constance (2015-04)

Thesis (MScAgric)--Stellenbosch University, 2015.

Thesis

ENGLISH ABSTRACT: Sustainability issues and the structural over-supply of wheat in the Western Cape since the middle 1990‟s have caused the introduction of alternative crop rotation systems in the Middle Swartland, a dry-land winter cereal production area of the Western Cape. Crop rotation systems typically consist of cereals and oilseed crops and pastures. Alternative crop rotations systems are currently scientifically evaluated at the Langgewens Experimental farm. Currently more than half the cultivated area in the Swartland is still under wheat production, a third of which is wheat monoculture. An issue regarding the adoption of such a crop rotation system is the cash flow and affordability of implementing such an alternative system. The goal of this study is to determine the cash-flow implications of a shift from wheat monoculture to a crop rotation system. Typical strategies available to producers to support such a shift are investigated. The complexity of farm systems as well as the interrelationships between crops within such a crop rotation system necessitates the implementation of a systems approach. A multi-period, whole-farm budget model was constructed to capture the interrelationships of the farm system and to express the financial performance thereof in standard profitability criteria. The farm model is based on a typical farm for the Middle Swartland. The model was used to determine the expected profitability of various crop rotation systems and to evaluate alternative strategies to accommodate the shift to alternative systems. The Langgewens crop rotation trial results are used to determine expected profitability of various crop rotation systems. A wheat-monoculture system serves as basis for the shift to alternative systems with the focus on the practical implications of such as shift. The profitability calculations show that various crop rotation systems are expected to be more profitable than wheat monoculture. The most profitable system is one year canola followed by three years of wheat, followed by a wheat/medic system with Dohne Merino sheep on the medic pastures. The shift from wheat monoculture is simulated by four scenarios. The first evaluated the financial implications of a shift form monoculture to the three year wheat and one year canola system. The second simulates a shift from monoculture to a wheat/medic system within two years and using own funds. The third scenario simulate the same shift with own funding, but over a ten year period. The fourth is similar to the second, but borrowed money is used to fund the shift.Lower input costs and consistently higher yields results in higher expected gross margins for the crop rotation systems, especially with nitrogen fixing plants. The inclusion of medic and medic/clover pastures and alternative cash crops such as canola and lupins show a higher yield on investment than wheat monoculture. Insight into the factors that producers should consider was also generated by this study, concerning changes to crop rotation systems. These factors include; time period over which a shift is planned and the availability of financing options. It seems that a quicker shift, using borrowed funds, is more profitable over the longer term.

AFRIKAANSE OPSOMMING: Volhoubaarheidskwessies, en die strukturele ooraanbod van koring in die Wes-Kaap, het sedert die middel 1990‟s, gelei tot alternatiewe gewasproduksiestelsels in die Swartland, ʼn droëland wintergraanproduserende area van die Wes-Kaap. Gewasproduksiestelsels bestaan tipies uit graan- en oliesaad- en weidings gewasse. Alternatiewe gewas-wisselboustelsels word wetenskaplik gevalueer op die Langgewens proefplaas. Tans is meer as die helfte van die area in die Swartland steeds onder koring produksie, ʼn derde daarvan is koring monokultuur. ʼn Bekommernis rakende die aanneem van wisselboustelsels is die kontantvloei en bekostigbaarheid van die implementering van so ʼn alternatiewe stelsel. Die doel van hierdie studie is om te bepaal wat die kontantvloei implikasies van ʼn skuif van ʼn koringmonokultuurstelsel na ʼn wisselboustelsel is. Tipiese strategieë beskikbaar aan produsente om so skuif te finansier is ook ondersoek. Die kompleksiteit van boerderystelsels en die interverwantskap tussen gewasse in ʼn wisselboustelsel noodsaak die insluiting van ʼn stelselsbenadering. ʼn Multi-periode, geheelplaasbegrotingsmodel is ontwikkel om die interverwantskap van die boerdery te verenig en finansiële prestasie uit te druk in erkende winsgewendheid kriteria. Die boerderymodel is gebaseer op ʼn tipiese plaas vir die Middel-Swartland. Die model is gebruik om die winsgewendheid van verskillende wisselboustelsels te bepaal en om verskillende strategieë te assesseer wat die oorgang van wisselboustelsel kan akkommodeer. Die Langgewens wisselbouproefdata is gebruik om die winsgewendheid van verskillende wisselboustelsels te bepaal. „n Koringmonokultuurstelsel dien as basis vir die oorskakeling na alternatiewe wisselboustelsels, met die fokus op die praktiese implikasies van so ʼn skuif. Die winsgewendheid bepaling wys dat verskeie wisselboustelsels meer winsgewend is as koring monokultuur. Die mees belowende stelsels is een jaar canola gevolg deur drie jaar koring en ʼn koring/medic stelsel met Dohne Merino skape op die medic weidings. Die oorskakeling vanaf koring monokultuur is gesimuleer deur vier scenario‟s. Die eerste scenario evalueer die finansiële implikasie van ʼn skuif van koringmonokultuur na ʼn wisselboustelsel met een jaar canola. Die tweede scenario evalueer ʼn skuif na ʼn koring medic stelsel binne twee jaar met eie fondse. Die derde scenario simuleer dieselfde skuif maar oor ʼn tien jaar tydperk, met eie fondse. Die vierde scenario simuleer dieselfde skuif na koring/medics maar oor ʼn twee jaar periode met geleende fondse. Laer insetkoste en konstante hoër opbrengste lewer hoër brutomarges vir die wisselboustelsels, veral die met stikstofbindende weidingsgewasse. Die insluiting van medic en medic/klawer weidings en alternatiewe kontantgewasse soos canola en lupiene wys ʼn beter opbrengs op kapitaal investering in vergelyking met koringmonokultuur. Bykomende daartoe verskaf die resultate van die studie insig in die faktore wat graanprodusente behoort te oorweeg wanneer ʼn oorskakeling na alternatiewe wisselboustelsels oorweeg word. Die faktore sluit in, die tydperk waaroor die oorskakeling beoog word en die beskikbare finansieringsopsies. Dit blyk dat ʼn vinniger oorskakeling, selfs teen die koste van finansiering, oor die langtermyn meer winsgewend is.

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