by Rizel Delano

Corporate farming

Ways to induce agrarian growth

agribusiness can contribute to food security
wheat .jpg

Farm structure affects, and is affected, by public policy and the economy. It describes important developments in the farm sector and specific commodities, its impacts on productivity, financial performance, prices and environmental outcomes.

In corporate farming, the farm is under a contract to produce just for one corporation that governs a specific segment in the food industry. Corporations need the products to look and taste the same, thus they have strict policies that must be followed.

Often this practice drives a system where the farm owner, the farm manager and the farm worker are different entities. That is a dramatic change from the historic structure of agriculture, where the people who labour in farming also make the decisions and reap the profits of their work. Contract farming is where the farmer is contractually bound to supply a given quantity and quality of product to a processing or marketing enterprise.

The buyer agrees in advance to pay a certain price to the farmer and often provides technical advice and inputs.

Independent farms do not supply food for a single corporation. Many independent farms focus on organic and natural farming methods, which means that production is smaller and prices are higher. In South Africa corporate farming and contract farming practises are mostly referred to as commer- cial farming.

According to the Minister of Economic Development, Ebrahim Patel, commercial farmers account for 95% of the country’s locally-produced food, planting their crops on only 5% of total agricultural land and owning 72% of all livestock. The remaining 5% of food is produced by the 220 000 emerging farmers and 1.3 million subsistence farmers in the country.

This demonstrates that national food security depends on commercial farming. Also, partly due to global restructuring of markets and the deregulation of the agricultural sector, the development of integrated value chains with the emergence of new private entities is seen as an opportunity for small-scale farmers in South Africa.

A study by the UN Food and Agriculture Organisation (FAO), noted that South Africa’s commercial farming can grow significantly in the national economy with increased exports.

However this economic benefit is being captured by a narrow selection of producers and marketing agents.

Contract farming is generally considered as an attractive mechanism for poorer farmers to enter into the open-market economy to increase production and income. But contract allocations may be selective, excluding the poor who have unequal bargaining power, subjecting them to high risks and limited access to technologies required to be competitive.

The economic challenge therefore, is to broaden distribution of incomes across various farm structures. South Africa’s agribusiness sector can positively contribute to this by expanding the volume through industry guidance and various forms of contracting. TechnoServe, a non-profit organisation, is focussing on building competitive farms, businesses and industries.

The organisation works alongside small-scale farmers and farming co-operatives linking them to information, capital and markets to generate income, jobs and wealth for their families and communities.

Farmers are given access to resources to produce and supply to markets and to become a sustainable part of the broader agriculture value chain.

TechnoServe was granted more than R40 million from the jobs fund based on the continuing success of its agricultural projects across several provinces. Additional match-funding comes from Standard Bank, earmarked to expand and accelerate existing job creation programs in Limpopo, Mpumalanga and North West. By consumer demand, retailers and manufacturers are greening their product ranges through certification and standards.

Certification is an effective tool, particularly when a more holistic approach is adopted as in the case of the Woolworths Farming for the Future guidelines for fresh produce suppliers.

Together with farmers, Woolworths pioneered a new approach to growing food in harmony with nature without compromising quality or adding to costs.

Farming for the Future manages the entire farming process systematically, starting with building and maintaining the good soil needed to produce good food.

Healthy soil is better able to retain water, so it needs less irrigation. It also needs fewer chemical interventions, which means farmers only use synthetic fertilisers or herbicides when needed.

Fewer chemicals mean less chemical run-off, which along with less soil erosion and loss of top soil helps maintain water quality and biodiversity. South Africa is to produce as much produce over the next 40 years as it did in the last 10 000 years, and would have to do so on about the same amount of land.

The country needs to do this in the face of increasing environmental cost, changes in the climate, and challenges of even higher input costs and market access.

Agriculture businesses are to tackle these challenges by farming smart with modern, efficient methods and utilising commercial farming to its full potential.


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Issue 46


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