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Stellenbosch - Something akin to the co-operatives of the past will be needed for smaller scale agriculture, according to Nico Groenewald, head of agribusiness at Standard Bank.
This is because single players are going to find it increasingly difficult to achieve the economies of scale necessary to improve margins while increasing production.
Groenewald took part in the latest roadshow by Standard Bank’s agribusiness division, which took place in Stellenbosch on Wednesday.
The roadshows are aimed at engaging major role players in discussions around the outcomes of current trends in the sector.
The collaborative approach of the past must, however, be refined to make both big and small players competitive.
“The co-operatives of the past tended to focus on storage and marketing via the regulatory confined marking channels at the time," said Groenewald.
"That focus is too narrow for today’s agricultural sector. But the principle of operations with similar interests grouping together for mutual advantage is a good one."
He said the emphasis for agriculture in the next five years will be on size, because that is where the economies and negotiation strength lie.
That does not mean that each farmer has to scale up. Collaboration confers size far more easily, he said.
Next generation agriculture
It is time to start talking about next generation agriculture and the whole industry needs to be reorganised, according to Groenewald.
“Topics such as food security, food sustainability and self-sufficiency have become highly prominent over recent years," said Groenewald.
"These themes have added to the usual agricultural challenges of market and consumer shifts, exchange rates, and the enduring of responsibilities of environmental curatorship."
He said the pivotal economic role agriculture has always played has now expanded into a much deeper social and political responsibility.
"As a consequence, agricultural role players need to reorganise the way individual operations are structured in order to minimise risk and increase profitability in this new landscape," he said.
“This will trigger agricultural financiers to rethink their own risks and develop the will and means to finance new types of agricultural entities.”
Value chain
There are also vast untapped opportunities in the value chain.
"The only realistic way for farmers to increase margin in any significant way is to have a share of the margins of everyone in the value chain," he said.
"We would encourage farmers to consider the options available to add value to their product themselves – and to even extend that thinking to developing their own brand. By doing so, they can get a direct share of the consumer’s wallet."
Agriculture has no choice but to restructure at the farm-level, and also up and down stream, said Groenewald.
He warned, however, that restructuring is best done from an already successful, productive base.
“Any growth from a flawed foundation will be short-lived. Being excellent before you go big is the road to sustainability,” he said.
This is because single players are going to find it increasingly difficult to achieve the economies of scale necessary to improve margins while increasing production.
Groenewald took part in the latest roadshow by Standard Bank’s agribusiness division, which took place in Stellenbosch on Wednesday.
The roadshows are aimed at engaging major role players in discussions around the outcomes of current trends in the sector.
The collaborative approach of the past must, however, be refined to make both big and small players competitive.
“The co-operatives of the past tended to focus on storage and marketing via the regulatory confined marking channels at the time," said Groenewald.
"That focus is too narrow for today’s agricultural sector. But the principle of operations with similar interests grouping together for mutual advantage is a good one."
He said the emphasis for agriculture in the next five years will be on size, because that is where the economies and negotiation strength lie.
That does not mean that each farmer has to scale up. Collaboration confers size far more easily, he said.
Next generation agriculture
It is time to start talking about next generation agriculture and the whole industry needs to be reorganised, according to Groenewald.
“Topics such as food security, food sustainability and self-sufficiency have become highly prominent over recent years," said Groenewald.
"These themes have added to the usual agricultural challenges of market and consumer shifts, exchange rates, and the enduring of responsibilities of environmental curatorship."
He said the pivotal economic role agriculture has always played has now expanded into a much deeper social and political responsibility.
"As a consequence, agricultural role players need to reorganise the way individual operations are structured in order to minimise risk and increase profitability in this new landscape," he said.
“This will trigger agricultural financiers to rethink their own risks and develop the will and means to finance new types of agricultural entities.”
Value chain
There are also vast untapped opportunities in the value chain.
"The only realistic way for farmers to increase margin in any significant way is to have a share of the margins of everyone in the value chain," he said.
"We would encourage farmers to consider the options available to add value to their product themselves – and to even extend that thinking to developing their own brand. By doing so, they can get a direct share of the consumer’s wallet."
Agriculture has no choice but to restructure at the farm-level, and also up and down stream, said Groenewald.
He warned, however, that restructuring is best done from an already successful, productive base.
“Any growth from a flawed foundation will be short-lived. Being excellent before you go big is the road to sustainability,” he said.
