Economies of size in sugar cane production in KwaZulu‐Natal

Abstract

This article examines how efficiency of resource use on sugar cane farms varies with the size of a farm business, and what implications variations in performance may hold for the reallocation of resources between size‐groups in the pursuit of land redistribution. A non‐parametric data envelopment analysis (DEA) research procedure is employed to analyse farm‐size efficiency using inputs valued at opportunity cost. Results indicate that sugar cane farms producing less than 500 tons of cane exhibit substantial economies of size, and require significantly more resources to produce a rand's worth of output than farms producing more than 2 500 tons of cane. Therefore, if commercial farms are subdivided in the land resettlement programme, significant loss of efficiency may occur if the resettled farms produce less than 500 tons. Finally, results of an econometric model suggest significant links between scale efficiency and farmers’ education, managerial adeptness, training, age, and the size of farm holdings.

Notes

Respectively, Graduate Student and Professor of Agricultural Economics, University of Natal, Pietermaritzburg. Research was carried out in the Agricultural Policy Research Unit, and was financially supported by the Centre for Science Development and Tongaat Hulett (Sukumani Development Company).