by Marcos Fava Neves

Modern farming

SA and Brazil's agricultural practices differ

A company, to operate with farmers, must have a mindset of 'thinking like a farmer"
farm tools.jpg

The idea is to raise the facts that are changing, the impacts brought on by these facts and leave an open discussion about which acts companies, that are performing with farmers, should implement. Ideas are based on discussions with farmers and research in four of these countries – Brazil is probably the one country that most fits the following trends:

  • Increasing price volatility in the world of agriculture;
  • New risks due to climatic change and governmental regulations;
  • Access to technology being more crucial and technological availability is increasing;
  • Increasing farming concentration (more farms per farmer being managed);
  • Much more information available, most of them for free;
  • Changes in farming production business models;
  • Changes on farmer’s behaviour, more professional and informed; 
  • Farmer diversification to other regions and activities, including livestock;
  • Farmers are getting more capitalised, but still need credit due to price/cost volatility;
  • Increase of capital needs and land usage restrictions;
  • Urban opportunities for labour are growing;
  • Scarcity of resources needed by farmers to produce.

These changes in the farmers environment bring several impacts within the food chains:

  • Shift of bargain power towards farmers; 
  • Farmers are creating increasingly bigger buying groups;
  • The need to build scale as a basic principle;
  • Increasing costs of labour;
  • Well informed farmers, increasing on a yearly basis – technical and market expertise
  • Increasing costs of adjustments to more restrictive environmental institutions;
  • The issue of good land management;
  • Multiple buying attributes demand different approaches to serve farmers with different profiles;
  • Price and technical issues are becoming more important considering farmer’s buying behaviour;
  • Information is more available about suppliers of products and services and also prices of the offers and solutions;
  • Opportunities to develop new credit alternatives and support the farmers working capital needs;
  • Increase of risk exposure and demand for capital due to the more sophisticated offers existing in the market.
  • The use of technology will allow incredible changes in the future, mostly linked to digital 'cloud' farming.

Based on research, at least four segments of farmers can be clearly characterised in emerging farming countries like Brazil:

Conventional Farmer (COF): more small to medium size, familiar management, machinery for own use, owns the land, low chain integration and focus on agriculture, their major business. Were recognised entrepreneurs in the past when the business was built. Very traditional in their profile, tend to be older. With the conventional farmer we may add size of the farm and degree of technology usage. 

Business Oriented Agriculture (BOA): these are more medium and large farmers, from familiar to professional management, working mostly on own and leased land and equipment, having some chain integration in trading or acquisition functions, core business is within agriculture and commercialisation and are more present in non traditional agricultural areas.

Network Managing Farmers (NMF): Normally large-scale operations, with a professional management, own structure of equipment and lease to other farmers, very integrated in terms of a network perspective, providing services to other farmers. Have economies of scale in inputs, bundling seeds, crop protection, fertilizers, logistics, credit and others. Also most of these companies are becoming global farming companies, and they tend to base their expansion in long-term land leasing with lower investment in assets.  

Farm Transformers and Builders (FTB): these companies or farmers are more common in agricultural frontiers. Companies that are opening new areas, transforming land not used or used for pastures towards agriculture, very large, professionally managed and really focusing in real estate. So they will wait for the value increase of the land and then take the profit selling the land, probably to the network-managing farmers with a profile of land acquisition.

These are four clear segments that can be found in emerging countries agriculture with expansion of land. To understand these segments and profiles it is important to build the linkages with farmers. One thing is true: a company, to operate with farmers, must have a mindset of 'thinking as a farmer' and behave more 'grower-centric'.

 

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