Add value, not volume

Fresh produce ­farmers always struggle to make some profit.
Issue date 1 June 2007

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Fresh produce ­farmers always struggle to make some profit. They are at the will and whim of so many ­external ­factors that the mere ­maintaining ­of ­quality and ­consistency becomes a ­challenge. Unfortunately, many of them opt for the volume route.
Let’s take a hypothetical farmer who reasons that if the price of ­tomatoes has been good, production should be increased. This farmer reckons that if production is increased from 50 000 boxes to 150 000 at R25 per box (a price based on the neighbour’s hearsay), R3 750 000 will be made! With that our farmer can pay off all the debt and buy that new 4×4 bakkie. So, our intrepid farmer sets about ­in an attempt to make a fortune with increased volumes of ­tomatoes. But as it turns out at the end of the ­season, the bank balance is almost as bad as this time last year. The farmer still has to pay half the packaging bill and the market agent had to condemn 30% of that final consignment. What ­happened to last year’s wonderful market prices?

What went wrong?

Many mistakes could’ve been made. Our farmer believed his neighbour about the price. But what exactly did the ­neighbour mean? Was that the top price or was it an average for the season? Chances are it was no reflection of the latter.
Did our millionaire-in-the-making plan a 200% increase in production? Did our farmer have the infrastructure on the farm to handle the increased ­production? Was the equipment up to the task and was there enough labour? In the end the ­question should be asked: was our farmer in the financial position to take on this new challenge and was it thought through? Not to mention market research and consulting a market agent.

The way to go

It would have been better if our farmer did not increase volumes, but rather spent some time and effort on i­mproving the yields and quality of the­ ­existing ­tomatoes. ­Developing the right ­production ­techniques, spending time in the ­packhouse, consulting daily with a ­market agent, and ensuring that a quality product was consistently available to the buyers, would’ve been more beneficial.
If the value route and not the volume route was followed, our farmer might have been the proud owner of a new 4×4 bakkie by now. – Mike Cordes

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Contact Mike Cordes on [email protected]. |fw