Frikkie Mare

The impact of drought on commercial livestock farmers in South Africa

ABSTRACT This article reports on a study that aimed to assess the impact of the 2015 drought in South Africa on commercial livestock producers, with specific reference to the associated drought adoption strategies. The study was based on primary data collected from 350 commercial livestock producers from seven different provinces. The findings revealed that the effect of drought had a significant impact on average herd size, livestock feeding, and sheep flock. Commercial livestock producers did not receive any form of assistance from the government. The majority of the farmers did not have any preventive measures in place during the drought. The study recommends that the government and policymakers should introduce a mechanism to support commercial livestock farmers when drought strikes.

The profit-maximising feeding period for different breeds of beef cattle

ABSTRACT The objective of this study was to determine the profit-maximising feeding period (PMFP) of different breeds of beef cattle. The differentiation between breeds according to their genetic growth potential was identified and used to increase feedlot profitability and sustainability. The unique growth and feed intake data of different breeds was generated through a feedlot feeding experiment. The PMFP model was developed to incorporate the variable economic value and the unique production data of each breed into a model. The PMFP model can determine alternative PMFPs for any price scenario. The results indicate that breeds can be differentiated in terms of genetic production potential. The seven breeds used in this study can be divided into three groups in terms of their estimated PMFPs for the specific scenario. The Brahman, Bonsmara, and Afrikaner can be grouped together with a PMFP of 16 weeks for the Brahman and Bonsmara, and 15 weeks for the Afrikaner. The second group included the Simbra and the Angus, which have a PMFP of 21 and 22 weeks respectively. The Simmentaler and Limousin have a PMFP of 27 and 26 weeks respectively, which groups them together in the final group. In conclusion, additional Gπ can be generated by each breed by feeding them according to their unique PMFP. According to the case study the additional gross profit that can be generated by the implication of the PMFP-model was 6%.

The influence of animal traits on feedlot profitability of Santa Gertrudis cattle in South Africa

ABSTRACT Approximately 75 per cent of South Africa’s beef is finished by feedlots. The profitability of the beef industry remains under pressure due to various external factors. Previous research has shown that many factors influence feedlot performance and profitability. It is, however, very difficult to judge an animal’s inherit feedlot performance before it enters the feedlot. The aim of this study was to explore the relationship between the animal traits of Santa Gertrudis bulls and the feedlot profitability of these bulls. Analysed traits included the sheath score, capacity score and build score as high scores for these traits are believed to be associated with better feedlot performance. The data for this study was collected from 48 Santa Gertrudis bull calves. The profitability of feeding cattle was expressed as the Total Margin (TM) and Feed Margin (FM). Given the nature of the dependant variables, Ordinary Least Squared regressions were used for the analyses with TM and FM as dependent variables. Results show that although both models were significant, the sheath score was the only individual trait that proved to be significantly correlated with both TM and FM. Sheath score proved to be negatively correlated with TM and FM while it was expected, through popular belief, to be positively correlated. This implies that animals with lower sheath scores, thus with sheaths closer to their bodies, perform better in the feedlot and may affect the TM and FM positively. The magnitude of this trait still remains under question and further research is required.

Evaluating the long-term effectiveness of crop insurance products to provide cost effective and constant cover for maize producers under stochastic yields and prices

ABSTRACT The long-term effectiveness of crop insurance products to provide cost effective and constant cover for maize producers against a production risk under stochastic yields and prices was evaluated. Hail occurrence in low and high risk areas was considered as the production risk, with Short-term Crop Hail Insurance (SCHI) and a Contingency Policy (Self-insurance) in the Alternative Risk Transfer (ART) market as insurance options. A financial simulation model was built to simulate the cash flow of a maize enterprise and to calculate the producer’s annual margin after interest and tax. Stochastic Efficiency with Respect to a Function (SERF) was used to rank Net Present Value (NPV) of the margin after interest and tax for different scenarios of Certainty Equivalents (CE’s) and to calculate the Utility Weighted Risk Premium (UWRP) of each scenario. The model could evaluate the effectiveness of crop insurance products. The SCHI was the preferred option in Mpumalanga (high hail risk area) and ART in North West (low hail risk area) based on the cost effectiveness of the options. The ART, however, was not able to provide constant cover at all times and the long term efficiency thereof should be carefully considered before it is applied as the sole hail risk mitigation strategy.

Estimating The Maximum Value of Crop Hail Insurance Under Stochastic Yield and Price Risk

ABSTRACT The objective of this article is to estimate the maximum value of crop hail insurance according to the financial extent of hail risks impact on the enterprise in two regions, North West (low hail risk area) and Mpumalanga (high hail risk area). The difference in the cumulative probability distributions of the Net Present Value (NPV) of the margin after interest and tax in the event of hail and in the event of no hail will provide a graphic indication of the financial impact of hail. To determine if the decision maker is willing to pay in order to remove the impact of hail on the enterprise, the utility weighted risk premium (UWRP) must be calculated with the use of stochastic efficiency with respect to a function (SERF) analysis. The calculated maximum benefit (or UWRP) that the decision maker will receive through the elimination of hail will set the upper limit for the cost of crop hail insurance. The results indicate that hail does have a negative impact on the financial position of the farms in North West and Mpumalanga. The effect of hail risk in Mpumalanga is, however, more severe. The calculated maximum benefit (UWRP) from the elimination of hail damage in two regions is R83.50/hectare in North West and R708.70/hectare in Mpumalanga. The conclusion can thus be made that decision makers in both regions will be willing to pay for crop hail insurance, but much more so in Mpumalanga than in North West.