South Africa farm strikes

The role of the retailer in the farm strikes.

Alternative title “It is not only the farmers fault”

Hello Dear Reader

The recent farm strikes need to be viewed in a wider context. From the farmer right through to the end consumer. We are all farmers by proxy, each and every one of us exercises that vote at least three times a day, and by choosing what food we eat and where we buy it, we choose which farmers we support.

I am not attempting to absolve farmers of responsibility to treat their staff well, pay them well (the ANC government set the minimum wage so their comments are mere political opportunism), treat their animals humanely and ensure safe and comfortable working conditions. I would like to focus on the retailer’s role (the big national chains) as they set the price for most of the farmers.

The old joke about a farmer complaining the least in February because it is the month with the least days alludes to the fact that the farmer is being pressurised from all sides, at all times. The primary pressure comes from the income side where prices and payment terms are driven by retailers. The role of the grain traders in artificially moving prices is a topic of discussion for another day. On the expense side the pressures are the ever increasing input costs such as fuel, chemicals, seed, veterinary costs, soil balancing costs and labour costs. Other pressures include the weather (ZZ2 recently lost 140 hectares of tomatoes in a hail storm) as well as having a mostly uneducated workforce.

The retailer’s greatest pressure is to sustain profitability and if you really want to own its shares then it must continue to grow earnings. The easiest way to do this is to squeeze the suppliers. Lets take the example of milk. A certain retailer pays the farmer R2.50 per litre for the milk and then sells it at R10.00 for that same litre. If the farmer is lucky he gets paid 30 days after statement but that is more likely to be either 60 or 90 days. (Walmart/Massmart being the exception paying every 14 days). I am not trying to trivialise the work of the retailer. However the farmer has taken the risk to produce the milk. He has had to keep the animals healthy, make sure they are fed, his staff are on time every day of the year to do the milking, his cows conceive, his dairy is kept hygienic, once milked that the milk stays chilled until the retailers truck arrives to cart it away yet he only gets ¼ of the price the consumer pays and he has to wait a minimum of 30 days from the statement at month end before he gets money that the retailer received the moment the customer paid for the milk. In no one’s definition is that farming for the future.

A farmer very near me received R6 per kg for beans last week that the supermarket sells on for R25 per kg.

Why does our government not insist on transparency in the food chain? The agricultural group Sekem in Egypt has managed a transparent association chain which satisfies everyone. A transparent food chain will be of benefit to farmers who can share this information with their workers and also be of the benefit of the end consumer who gets to see where his food Rands are being spent.

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