The cost efficiency of small farm inclusion in agribusiness supply chains

Abstract

The inclusion of small-scale commercial farmers in South African agribusiness supply chains is a national priority and there is an urgent need for managerial accounting (MAS) inputs to successfully accomplish this objective. This paper explores ways that small farmers can be cost effectively incorporated in modern agricultural supply chains. A case study methodology is used to test the research questions. The results demonstrate that small-scale farmers can successfully compete with larger growers with respect to production and cost efficiency. The results also illustrate that small-scale farmers generate higher levels of transaction cost than medium and large scale suppliers. A series of proposals are then developed in order to reduce the transaction cost of small farm supply. In conclusion, small-scale farmers can be successfully incorporated in agribusiness supply chains but only if special measures are taken to reduce differential transaction cost.