Masters Degrees (Agricultural Economics)
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Browsing Masters Degrees (Agricultural Economics) by Author "Britz, Karla"
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- ItemRooibos tea production cost activity-based costing break-even point farm financial planning cost allocation(Stellenbosch : Stellenbosch University, 2023-11) Britz, Karla; Hoffmann, Willem; Stellenbosch University. Faculty of AgriSciences. Dept. of Agricultural Economics.ENGLISH SUMMARY: Rooibos tea, Aspalathus linearis, is an endemic subshrub to South Africa and is the only plant in the Aspalathus genus with an economic value. The production cycle of Rooibos tea is nine years with an average of four harvests. Production of Rooibos tea is semi-intensive and a crucial consideration for producers is production cost due to relatively low yields. Since there is significant variation in farm types, yields, farming orientation, mechanisation and limited alternative enterprise selection, there is a lack of understanding of the full cost of tea production. The aim of this study is to determine the break-even yield for Rooibos producers in areas to improve the decision-making process to produce more cost-effectively. One of the characteristics of the Rooibos industry is recurring cycles where there is a shortage in the market for Rooibos tea which leads to high prices, this is followed by an increase in production, which leads to an oversupply in Rooibos tea and low to very low prices in the market. Therefore, the research question is what are the design criteria and implementation ability of a financial decision support tool to measure the impact of different production processes and yields on the production cost of cultivated Rooibos tea? The research techniques used include enterprise budgets, a literature study and gathering secondary data. In the process, a Rooibos tea cost calculator in Excel is created to calculate the total production cost per kilogram of dried tea produced and to calculate the break-even yield in terms of wet Rooibos tea harvested. First, an understanding of the Rooibos tea production process was needed to create the model. The understanding was formed by having discussions about the production process and how the industry works. Implementing the concept of activity-based costing and the equations to determine the break-even point, the model is created. In order to ensure the model is user-friendly it was used in different rounds of testing to identify possible problems. In this research project, there is a comparison of three different Rooibos production areas namely Clanwilliam, Sandveld and Tierberg to illustrate the difference in locations, soil composition, climate, planting density, yield, and production cycles. This is followed by a comparison between the total allocated production cost per hectare and the total cost per hectare. In the different areas, the total cost per hectare for 2023 is R6 219,35 in Clanwilliam, R4 108,18 in the Sandveld area, and in the Tierberg area, the cost is equal to R8 275,29 per hectare. The average cost per kilogram between 2021 and 2023 is equal to R23,20 in Clanwilliam, R28,79 in the Sandveld, and R33,48 in the Tierberg area. Only in Clanwilliam in 2023 was a producer able to break even. The main conclusions of the research project are that a deeper understanding of the production process is evident in the model construction and that the activity-based costing principle, and the inclusion of break-even analysis are useful attributes.