Search

A survey of 52 smallholder fresh produce farmers was conducted in the Gauteng province of South Africa to grasp how risk and its management affect the mainstreaming of smallholder farmers into formal, high-value markets. The study employed a supply chain analysis approach, which focused on the functions and risks that occur along the fresh produce chain. The results highlight the risks that impede the participation of smallholder farmers in formal, high-value chains. At the production level, risk is prominent from input procurement through to the post-harvest stage of the chains. At the retail and consumption level, risks are linked to the adherence to quality and quantity standards, including prescribed packaging, grading, labelling and traceability and transport requirements. As a result of these risks across the formal chain, smallholder farmers often resort to distributing their products in low-value informal markets. The consequence is that smallholder farmers tend to remain trapped in poverty, in part, because of their risk appetites and their ability to bear risk.Further research is required in the areas pertaining to smallholder farmers’ risk appetite and risk-bearing ability and mechanisms to deal with the particular risks in the value chain that impede their all-round ability to escape the “smallholder dilemma”.Keywords: Smallholders, supply chain risks, fresh produce, high-value markets

The transformation of agricultural production from subsistence to commercially oriented outcomes is a topical matter in the rural and socio-economic development discourse. Cassava crop is being promoted for commercialization because of its tolerance to harsh climatic conditions experienced in arid and semi-arid areas. Furthermore, there is high potential for the tuber crop to improve household income. In Kenya, a number of interventions have been directed towards commercializing cassava. The effect of commercialization on household income has not been established. Distinct from other studies, this study estimated the effect of cassava commercialization on three different income measures namely per capita, annual and per acre revenue. A household survey was conducted in Kilifi County in Kenya where 200 respondents were randomly selected. Data was collected using a structured questionnaire. A two-stage endogenous switching regression model was fitted to determine the effect of commercialization on the different income measures. The proportion of households that commercialized was 69% while the remaining 31% did not. The study found that majority of the households marketed low value-added cassava products. The results reveal that farmers who engaged in cassava commercialization enjoyed relatively more income than their counterparts. Off-farm income, age of the household head and distance to market had a negative significant influence in all the income estimates. Group membership was only significant for the per acre income while household size was negative and statistically significant in both per acre and per capita incomes. Findings point out the importance of promoting policies that will enhance cassava commercialization.

According to the Food Price Monitoring Committee (FPMC) (2003), milling and baking industries are highly concentrated, and most of the major millers are vertically integrated with bakeries. The Committee found that the baking industry is also characterised by a high level of market power, with six baking groups being responsible for 80 per cent of South Africa's bread production. Hence, this study aimed to identify the factors that restrict the development of agro-processing in the small wheat-milling and baking industries in the rural areas of South Africa. Data was collected by means of a structured questionnaire and by conducting 15 interviews with various small wheat-milling and baking firms in the supply chain as well as with major roleplayers. The study found that the small wheat-milling and baking industries have relatively high barriers to entry, including the ability to acquire the required capital to start operations; to establish a market; to acquire knowledge of the wheat-milling and ...

This study attempts to determine the extent to which the South African consumers' needs and demands for beef have changed, as well as to identify opportunities and to assess whether the beef value chain is positioned to meet these changes in a bid to improve the delivery of customer value. Consumer, supply chain and network analyses are critical to finding an optimal solution that is sustainable enough to meet the changing environment. Industry-specific information regarding the structure and function of the beef value chain was gathered through interviews with industry leaders and experts; and specific consumer information was gathered through a consumer survey. The South African beef industry, like many other South African supply chains, is challenged by the increasing complexity and demand brought about by globalisation, increased volumes and competition, the shortage of skilled staff and pressures to meet changing customer needs. Consequently, the power has shifted from the supply side to the...

Although South Africans are not predominantly wine drinkers, the industry is looking for ways to develop the local market to balance exports. The black middle class, increasingly referred to as the Black Diamonds are the most powerful marketing trend in the last 10 years as they have emerged as the strongest buying influence in the economy and making inroads in understanding this market presents a good opportunity. The data used in this paper was collected from an integration of a consumer behaviour survey; as well as personal interviews and focus group discussions. The paper asserts that the key factors influencing the South African consumers’ behaviour are age, gender, income, race and wine drinking history. The paper also asserts that not only are the black middle class are different from the white middle class but within the Black Diamonds different segments exist. The industry should particularly focus on marketing to the women and the “Start me up” age group in the group as there is limited consumer knowledge about wines, but a high willingness to experiment. The paper also suggests various new brand communication platforms that can be explored to reach this market as well as co-opetition between industry stakeholders.

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.

Rainfall variability and stocking rate in extensive ranching regions in the Northwestern Transvaal, South Africa, can have substantial influence on feed availability per animal and thus on beef production. A simulation model was developed to compare the degree of variability of revenues from four beef production systems, ranging from inflexible weaner marketing to marketing of 3-year-old oxen. Regression equations relating stocking rate and rainfall to calving percentage and weaning mass, and actual rainfall data over a period of 54 years were used in the analysis. Results indicated a lower mean revenue with a low income variation for the more intensive weaner system as compared to the more flexible 26–28-months and 39–42-months oxen production systems. Thus, in this area, characterised by low and rather variable rainfall, superior economic results can be obtained by choosing flexible production systems and marketing strategies.