Agriculture's tough 2016 an opportunity for change | Fin24

Agriculture's tough 2016 an opportunity for change

Jan 12 2016 15:00
Nico Groenewald

While the drought will impact farmers, consumers, and overall food security negatively during 2016, it should also stimulate change and improve performance in the agricultural sector.

Sustained, extremely high temperatures have made 2015 the hottest year in recorded history, making the current drought severe.

South Africa (SA) is a water scarce country and droughts are an integral part of the agricultural cycle.

Farmers and agribusinesses have proven to be extremely resourceful in drought conditions.

While mitigating the impact of the drought, we should eradicate inefficiencies in practices and systems and find alternative routes to sustainability.

With climate change making weather patterns increasingly difficult to predict, it may not persist for ever. Some recovery in the agricultural sector may be possible.

The fruit and nut sub-sectors have good prospects for 2016. But these sectors should make contingency plans and build buffers for the future in the case of unpredictability of the weather, new consumer trends and a strong global emphasis on food safety and security.   

The drought is taking its heaviest toll on the grain sector, but the opportunities lie in significant price movements. The price of maize, for example, moved by almost R1000 in six months.

It is no longer possible to take a passive approach in agriculture. Agility is the only way to sustainability.

If the maize sub-sector under produces in 2016, maize imports will have to increase. This will push up consumer prices.

Livestock producers will have to send stock to abattoirs early due to lack of grazing.

The oversupply and decline in the quality of the animals available for consumption will put the price of meat under pressure.

Feed for poultry will become more expensive and trigger a drop in profitability.

Production of sugar has been under pressure since 2015, creating more price anxieties for consumers and profit constraints for producers and processors.

What matters now is adapting quickly and sensibly to the circumstances. The place to start is with the balance sheet.

A word to farmers

Do proper production economics calculations to find out exactly where your break even points are.

When it comes to livestock, work out precisely what your reserves are, in terms of the amount and quality of grazing available.

Basing your decision on hard, verifiable facts could be the difference between losing or saving your farm.

Efficient and environmentally beneficial management of water needs to move to the top of agriculture’s agenda.

Agriculture is the custodian of most of the country’s natural environment. We need to take that responsibility seriously.  

One way is to use renewable energy. Another is to supply it – in the form of biomass.

The drought also highlights the importance of infrastructure to SA’s and the region’s food security.

Should the drought persist, it will necessitate the movement around the country of large quantities of imported commodities that will have an impact on feeding animals and humans.

Inadequate infrastructure will trigger food safety issues, among other risks.

All of these challenges are also part of the land reform discussion.  Redistribution of land is essential.

The process should ensure that natural resources are conserved, water is managed in the best interests of the whole country, and that the country’s food supply is secure.

Individual farmers and agribusinesses, commercial entities and government need to work together to make the industry more efficient and agile, regardless of the weather.

We need to look beyond specific conditions to a longer term strategy that will equip agriculture, not only to moderate the effects of climate change, but to also manage them effectively rather than to simply respond to consumer tastes.

*Nico Groenewald is Standard Bank’s Head of Agribusiness in SA.    

el niño  |  agriculture  |  farmers  |  grains  |  consumers  |  drought  |  livestock

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