Agri-economy
Inputs/Production
IT IS POSITIVE
to see producers adapting
to economic changes
MC LOOCK, SENIOR MANAGER AGRIBUSINESS (PRIMARY) AT STANDARD BANK
SOUTH AFRICA
A new combination of market forces is triggering a shift in producers’
operational focus as the agricultural sector continues to strive towards
achieving greater agility in order to meet the challenges of today’s ever-
changing economic landscape.
We at Standard Bank are pleased to see that primary producers are
becoming increasingly adaptable to these economic challenges by
innovating to remain sustainable rather than simply waiting for better
times. We have been saying for some time now that being at the cutting
edge is the only way for South African agriculture to remain competitive
and, indeed, for farming to remain profitable in today’s globalised world.
Recent trends towards mechanisation and some aspects of precision
farming show that producers are trying to stay ahead of the economic
curve and reduce the cost base of their operations. This trend is clearly
demonstrated in the grain industry where conservation agriculture has
made considerable contributions towards working more sustainably
with resources while at the same time reducing costs and increasing
efficiencies.
Grain SA, the industry body, has even appointed an individual who will
mainly focus on conservation agriculture – indicative of the current
focus on more sustainable farming methods including precision farming.
Obviously this creates a demand for better technology and for the
replacement of older equipment.
What we would like to see more of, though, is an emphasis on creating
new revenue streams to reduce producers’ reliance on a single agri-
cultural activity. There comes a point at which cost reduction without
new revenue threatens the sustainability of a farm.
Affordable credit has also translated into visible changes in behaviour
among Standard Bank’s Vehicle and Asset Finance (VAF) customers. VAF
loans to producers cover everything in farming that has wheels, from
light delivery vehicles and trucks, to tractors and custom-built machinery
such as combine harvesters.
Although overall, new tractor sales for the first half of 2013 were 4%
down on the all-time high of R7,5 billion in 2012, there was an increase
of 18% over the same period last year for Standard Bank VAF’s financing
of customers’ new tractor purchases. This trend is further supported by
a 30% year-on-year increase in the financing of agricultural machinery
other than tractors, and an increase of 4,4% in combine harvesters.
For many producers, the new equipment will simply replace ageing
assets. For those who think forward however, it will put them on a path
to achieve their precision farming and mechanisation goals in order to
reduce their reliance on labour, which is becoming increasingly costly.
Superficially, the trend towards greater mechanisation in the agricultural
sector seems to be opposing our job creation imperative. However, if
mechanisation is used to make producers more agile and cost-effective
as they seek to expand and diversify their revenue streams, it could
potentially create new skilled jobs in the sector.
This particular trend towards increased mechanisation also shows that
producers are making astute use of affordable credit to equip their
businesses for a more efficient, productive future, thereby freeing up
their cash for the day-to-day running of the farm.
29
December 2013
“
The weakening
rand and low inter-
est rates encourage
equipment purchases,
broadening opera-
tional efficiency.
“
SA Graan/
Sasol Nitro photo competition
