Proceedings

PR – Financial Measurements To Rank Farms In The Northern Cape, South Africa, Using Data Envelopment Analysis

Producers use financial benchmarking in agriculture to compare financial performance across production years and to compare competitors in the industry. This study determined whether Data Envelopment Analysis could be used to divide farms in the Northern Cape (South Africa) into different performance groups using financial measurements. Three enterprise groups (crop, mixed, and livestock) were benchmarked using Data Envelopment Analysis and subsequently divided into efficient or inefficient groups according to operating efficiency. Efficient farms had an operating efficiency score of one and inefficient farms less than one. Results indicated that Data Envelopment Analysis could be applied to determine efficient and inefficient farms according to financial results. An alternative benchmarking tool to compare the operating efficiency of one farm relative to similar farms included in the data set was thus provided. It is recommended that the Data Envelopment Analysis benchmarking model be used in conjunction with other models or established norms to provide accurate information and a comprehensive overview of financial performance.

Key words: farm management, Data Envelopment Analysis, financial benchmarking, financial measurements

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Author(s): Henning, J.I.F., Matthews, N., Strydom, D.B., Willemse, B.J.

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Organizations(s): Department Agriculture Economics, University of the Free State