Why agriculture’s biggest challenges are no longer cyclical

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JIMMY MOYAHA: The world of agriculture is undergoing a fundamental shift in how it is that we are reading the agricultural landscape, and that could mean a whole new set of considerations that we have to be confronted with or that we have to deal with.

We’re going to be looking at this in a bit more detail with the team at Nedbank Agriculture.

I’m joined on the line by the head of sales at Nedbank Agriculture, Daneel Rossouw, to take a look at this and see what to make of it. Daneel, lovely having you on the show as always. Thanks so much for taking the time.

I saw a piece recently where you mentioned that the agricultural landscape in particular is moving away from, I suppose, what we would call a cyclical disruption to what would be a permanent change.

I could quite easily argue that with all the geopolitical things happening around the world, many industries are facing that. But why is it so different in the agricultural landscape?

DANEEL ROSSOUW: Thanks, Jimmy. I think we just need to perhaps take one step back and look at one generation back – in 1996, when we still had the agricultural marketing board, and that was single-channel marketing, and production and price risk were largely addressed through that marketing board.

But this also limited, I believe, productivity and innovation.

That was abolished in 1996. So basically, one generation has faced all these changes and challenges.

I think that’s why it’s worthwhile talking about this and the challenges and the shifts that we see.

So if you look at today specifically, we’re part of the world market. We are a net exporter of agricultural produce. So we are impacted by events both internationally, but also locally, I believe.

But yeah, if we think about the more permanent changes and challenges that we currently see that are longer-term in nature, obviously the first one is climate change, and it is not something that will go away.

I think it’s actually increasing the challenge and the risk exponentially. So I think that’s one of the biggest challenges and long-term shifts that we see compared to perhaps, one or two decades ago.

Then equally important, given that we’re a net exporter, are the changing trade dynamics and logistical challenges that we face.

We must remember that we have doubled our production since 1996. So there’s a lot more pressure on our infrastructure and especially our ports , and we know that that can change very quickly.

You just look at what happened in the world in the last two years, and without that safety net that we had previously through the marketing boards.

Then at the same time, we see – and I think that’s also long term in nature – our ESG [environmental, social and governance] reporting. That will come through, it’s actually with Nedbank , as a listed company.

So ESG, traceability and reporting – I believe those are among the major changes.

Then obviously linking to that is the change in consumer demand, and that can be seen as a barrier to market access as well.

JIMMY MOYAHA: Daneel, I want to look at that consumer demand as well, because it links into conversations around the ESG, around expectations.

Consumers, not just locally but internationally in the export markets as well, have become a lot more stringent around their expectations, their requirements, the things they look for out of the agricultural sector.

We look for things like sustainably farmed produce. We look for things that speak to traceability, as you mentioned earlier, especially when it relates to animal farming in all of those areas of agriculture. How much of the consumer element is influencing some of these other factors and reshaping the industry as well?

DANEEL ROSSOUW: Oh, definitely, I think that is real. Not just locally, but also abroad. As I said, we’re a net exporter and we see customers becoming more demanding and having more expectations in terms of how food is produced and becoming more selective as well.

We see growth being driven more by value rather than volume, especially in the overseas markets.

So consumers are looking for products and experiences to fit their specific lifestyle, and considering value and budget as well.

There’s also more competition in the market with alternative products and different categories of products [and] technology – social media – impacting and influencing consumer behaviour.

But then , if you look at sustainability, that’s now a business imperative. It is not just consumer-driven.

It’s becoming clearer now and I believe that agriculture is entering a new phase where sustainability, traceability and reporting are shifting more from compliance requirements to become core drivers of competitiveness in terms of market access.

So changing consumer demand, I believe, is central to this shift. We see buyers placing more emphasis on provenance, transparency and verifiable production practices, as you’ve alluded to as well.

So yeah, traceability as a result is becoming a market access requirement rather than a voluntary enhancement.

At farm level this is definitely increasing the need for more reliable data, and I believe more auditable supply chain information as well.

JIMMY MOYAHA: Daneel, before I let you go, how then does this influence your positioning as a financial institution? As Nedbank Agri, your responsibility at Nedbank Commercial Banking sits in being able to support these businesses in the agricultural landscape as they go through these transitions.

How then does that transition inform how, as an institution, you must transition to accommodate and to adapt to the environment?

DANEEL ROSSOUW: Oh, definitely. I believe financial institutions have a very critical and important role to play in this whole transition process.

We had an interesting discussion at Agbiz Congress specifically around funding this transition.

Talking about traditional lending alone will not be able to support the scale of transformation required. So we need to do some things differently.

I believe that the future of agricultural finance and what we are also currently busy with, is increasingly partnership-driven, combining more commercial or typically commercial bank funding with more development finance institutions, developmental funding, and linking to government guarantees and private capital.

So this whole partnership idea is becoming more important.

In this evolving environment, the role of the bank becomes not only financial but also enabling.

I think that’s an important aspect that we don’t always talk about. But we have the ability to direct capital towards investment in sustainable practices and typically fund where we believe the market needs to go.

But then also helping producers meet these shifting reporting requirements and supporting investment, especially in climate adaptation technology. So yeah, we can’t underestimate the role of financial institutions in this whole transformation process.

JIMMY MOYAHA: The world of agriculture is evolving and identifying how it is that that evolution fits into your business, but also into your offering, is what sets the service providers apart in terms of how it is that they look after those respective markets.

We’ll have to leave this conversation on that note. Head of sales at Nedbank Agriculture, Daneel Rossouw, joining us to take a look at the fundamental changes that are taking place in the world of agriculture.

Brought to you by Nedbank Agriculture.

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