Abstract
With a strong commercial incentive driving the increase in game ranching in Southern Africa the need has come for more advanced management tools. In this paper the potential of Portfolio Selection Theory to determine the optimal mix of species on game ranches is explored. Land, or the food it produces, is a resource available to invest. We consider species as investment choices. Each species has its own return and risk profile. The question arises as to what proportion of the resource available should be invested in each species. We show that if the objective is to minimise risk for a given return, then the problem is analogous to the Portfolio Selection Problem. The method is then implemented for a typical game ranch. We show that besides risk and return objectives, it is necessary to include an additional objective so as to ensure sufficient species to maintain the character of a game ranch. Some other points of difference from the classical Portfolio Selection problem are also highlighted and discussed.
Highlights
The trend towards transforming livestock production systems into game ranching has increased rapidly since the early 1990s
In 2008 some 3000 additional livestock farms were in the process of conversion to integrated game and livestock production
Strategies to improve the economic returns from game ranches were formulated by Hearne et al (1996), but this work did not deal with risk
Summary
The trend towards transforming livestock production systems into game ranching has increased rapidly since the early 1990s. Strategies to improve the economic returns from game ranches were formulated by Hearne et al (1996), but this work did not deal with risk. Theron and Van den Honert (2003) dealt with issues of risk and return in an agricultural context. They developed an agricultural investment model based on investment portfolio techniques first proposed by Markowitz (1952). The ideas of Theron and Van den Honert are followed in this paper. Their potential application to game ranches is explored by means of an illustrative case study
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