A strategic analysis of sugar cane supplies from a miller cum planter to a sugar mill in KwaZulu-Natal.
Russell, Paul William.
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This is a case study of an irrigated sugar cane Estate owned by the Company that mills sugar cane from the irrigated farms that make up the Estate and also from a wide range of other suppliers. The agricultural land on which the sugar cane is grown is threatened by divestiture in that the Mill could conceivably obtain supplies from other Private Growers and other contracted suppliers who are the potential purchasers of divested land. This is the problem that the research addresses. The case study addresses this problem by analysing the relationship between a specific sugar mill and its company owned Estate which supplies cane to the Mill, from irrigated sugar cane lands. In other cane growing areas Estate operations have been divested and the cane supplies outsourced to Private Growers. The case study evaluates this management strategy in the particular case of the Heatonville irrigation Estate supplying sugar cane to the Felixton sugar mill, both of which are owned by Tongaat-Hulett Sugar Limited. In 1993 the Company had vertically integrated backwards, and invested in agricultural land in a move to secure strategic cane supplies for the Felixton Mill. The Mill was at that time, and still is, under supplied with sugar cane on an annual basis. The case study provides a review of the relevant literature in the fields of vertical integration, divestiture and outsourcing which are concepts that can be related to the actions that the Company is taking in selling off significant potions of its agricultural land holdings. An overview of the concepts of marginal cost and marginal revenue are given in order to assist in the understanding of the relationship between the sugar mill and the Company owned Estate. The research design is guided by five main research questions around which the methodology and data collection processes are focused. These research questions are all related to the research problem. Computer generated budget models are used to evaluate financial and production information, with the assistance of tables and graphs. The specific relationship that the Estate has with the Mill in terms of its financial contribution towards milling revenues is also highlighted as a strategic benefit. A summary of results is presented by answering the specific research questions. The case study concludes that the Heatonville Miller Cum Planter irrigation operation provides strategic cane supplies to the Felixton Mill, which if outsourced to third parties may be at risk. The case study makes no attempt to generalise findings to other cane growing irrigation schemes. However where similar situations prevail management decisions could well be guided by the findings of this study, given the systematic application of the budget models in each situation.