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Managing a profitable commercial agricultural business requires more than effective budgeting and financial bookkeeping. Due to dramatic changes in the agricultural decision-making environment over the past 15 years, farmers have to realise that farming requires effective risk management. A successful farmer is one who can identify these risks, match them up with expected returns and make the best decision on future actions. The farmer must be able to look strategically into the future and position the business in a way that ensures long-term sustainability and survivability. To forecast effectively, it is vital for the agribusiness to predict the effects of various risks on the financial position of the business. This research attempts to develop a simulated dairy management model that can be used as a farm management tool. Normal distributions were used to simulate the movement of maize prices under different scenarios. This model was applied to a 2007 case study, and it was found to be a suita...

With South Africa’s urban population approaching 60%, supermarkets and fast food chains have become important players in the South African food system. These large players in the food sector have systematically modified their procurement practices especially with regard to fresh fruit and vegetables and are now circumventing spot markets in favour of sourcing via in-house sourcing companies who mainly procure from preferred supplier producers. This paper draws extensively from a global research programme which seeks to highlight the market changes that potentially contribute to continued exclusion of the small producers from mass consumer markets. This paper illustrates, through a series of case studies, how integration of small-scale farmers into the urban retail market can be facilitated and how the challenges posed by the changing food system could possibly be overcome. The case studies illustrate various initiatives through which small-scale farmers and agribusinesses can be integrated into mainstream agri-food systems and may be used as models for an innovative approach to include small-scale farmers while still maintaining profitable business operations. They highlight the need for a multi actor approach for the successful participation of smallholder farmers in order to allow them to join the supply chain at any point within the channel.

Urbanisation and a growing middle class with changing consumption patterns provide an ideal setting for supermarkets to prosper. With South Africa's urban population approaching 60 per cent, supermarket retail chains are now important players in the agro-food sector. Over the last two decades they have begun to purchase produce from in-house sourcing companies who buy mainly from large-scale farmers. Together with the strict requirements of the retail groups, this makes it difficult for small-scale farmers to supply these retailers. This paper highlights the market changes that could continue to exclude small producers from mass consumer markets. It uses a case study to show how small farmers can be integrated into the urban retail market and, using evidence from this study, proposes a number of strategies to help them participate in the mainstream agro-food supply chains and an innovative model for including them while maintaining profitable business operations. 1Respectively, Professor, Research Fellow,...

Lending and financial institutions have looked for a variety of ways to expand their portfolios into agriculture, but because of the risks associated with lending to farmers who lack traditional forms of collateral, they face price and yield risks, causing these inroads to be limited. Market-based instruments are readily available for price risk. Organised exchanges offering the most basic of these instruments, futures and options, have operated for a long time, providing transparency to the market and low-cost risk transfer tools for those able to access them. While the use of price risk management instruments is an incomplete solution, it has sufficient merits on its own and will make the overall burden of risk more bearable. The use of these instruments and multi-peril crop insurance products is expensive and does not provide full protection for financial lending institutions to limit their credit risk exposure. This article determines whether geographic diversification would be sufficient as a risk management tool for lending institutions to limit their credit risk.