And I’ve heard from producers themselves – both locally and abroad – that supplying a supermarket is not always what it’s made out to be. Producers abroad have expressed envy at our system of commission markets because it gives farmers a say in determining the price. According to them, supermarkets effectively control almost every aspect of the deal, aiming for the most favourable payment terms.
A supermarket typically pays the producer after 30 days or longer. This means that producers lose interest on their money as it’s not working for them during this period. The difference in loss of interest between consignments sent to a direct buyer and those sent to a market is substantial. In SA, the market is required by law to pay the producer within five working days.
Supermarkets have a reputation – justified or not – for being tough with their suppliers and keeping the price as low as possible. I’m not opposed to a producer supplying a supermarket – in fact, it can be a good option. I did it as a farmer and it worked for me. However, only a small percentage of my total crop – the best quality of course – went direct to the supermarket and most of my production was sold through the markets. And that also worked for me.
Low market prices used by supermarkets
However, the fact that most of the produce ends up at a market impacts negatively on the price. It is this price that is quoted, and it is apparently cleverly used by supermarket buyers to demand a lower price for the better produce sold to them. It’s interesting to note that, despite their protestations about buying on a market, the major supermarkets still ‘shop’ there. With an eye for bargains, they are always ready to pick up something ‘cheap’. This is often a good thing, as they help clear the floor.
But as a producer, you should know whom you’re dealing with – and keep your options open.