Preparing for a future in agriculture where volatility has become a constant

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RYK VAN NIEKERK: Joining me now in the studio is Daneel Rossouw, head of sales at Nedbank Agriculture. Daneel, welcome to the programme.

I think many farmers are already accustomed to cycles – or at least over the past few decades they’ve become used to them. Things like droughts, volatility in production or product prices, fluctuating interest rates and exchange rates.

But I think when we look at what is happening in the world today, the only constant is that nothing is constant and farmers really need to position themselves to manage this.

DANEEL ROSSOUW: I couldn’t agree with you more, Ryk. And to take it a step back, you mentioned it’s been a few decades, but let’s go back even further to ’96, just one generation ago, when there was largely protection through our marketing boards, which were discontinued at that time.

We had single-channel marketing, which addressed production and price risks to a large extent. But of course, that also limited productivity and innovation, which is perhaps a critical component.

But today our producers are part of the global market with, as you mentioned, its ups and downs.

We are merely exporters, so we are impacted by events on an international level, as well as locally. I think those are things that have changed.

So if we perhaps look at some of the key things we can view as more permanent changes and which have the biggest impact on our producers, the primary one is climate change. We have discussed this before, along with the impact that climate shifts are having on our farming practices.

This is not something that is going away; I think we will see an exponential increase in the impact of climate change.

To prepare for it, we face a future where volatility has become a constant.

Then, of course, there are the changes in dynamics and logistical challenges.

We are part of a global trade environment, which changes rapidly without any safety net for our producers. There are no longer fundamental factors that simply dictate how trade dynamics work, which makes it quite difficult.

Another trend coming through strongly – and of a more permanent nature – is consumer demand and expectations.

We see consumers becoming far more selective, especially in export markets. Growth is increasingly driven by, for example, value rather than volume.

We see consumers looking for products and experiences that suit their lifestyle, values, and budgets, while competition from alternative categories is also on the rise.

I think technology and social media also play a major role in these shifts, as consumers now have access to far more information and choices than ever before.

Additionally, something coming through now that will certainly become permanent is compliance with reporting requirements.

For example, ESG [environmental, social and governance factors] and traceability and reporting, driven by changing consumer demand as a requirement for market access. We will see this becoming a constraint rather than a voluntary action.

And then I think, on a local level, infrastructure and municipal service delivery are heading in only one direction – and it isn’t necessarily a positive one.

We also face major challenges regarding our energy supply, where we aren’t seeing significant improvements yet.

RYK VAN NIEKERK: It is very clear that agriculture is no longer just about production; it extends far beyond that.

What do you think farmers need to do to ensure they remain sustainable in this changing world?

DANEEL ROSSOUW: Definitely investment. We cannot stop investing in our businesses.

Without continual investment, a business simply stagnates and can no longer be considered sustainable.

When we talk specifically about investment, we need to consider things that have an impact – for example, improving productivity, managing risk, and enhancing the competitiveness of our operations.

To name just a few – Ceres in the Western Cape is perhaps a good example, investing in greater energy independence. I think this is incredibly important.

It’s a high-value production area, but restrictions in Eskom’s supply are limiting growth in those regions.

Improved water supply is also vital. We are particularly dependent on irrigation, and we lose water to the cities, so investing in our water security is crucial.

Precision farming is something we see coming through very strongly, alongside improved logistics. These are perhaps the most important investment factors we need to discuss to keep a business or an industry running.

However, this means we must have a long-term perspective when making difficult decisions on investments.

Instead of merely looking at and reacting to current market conditions, we must look to investments that improve sustainability over time.

From an industry perspective as well – not just at the producer level, but across the sector – there needs to be greater investment in research and development, especially in cultivar development that is more drought-resistant, new technologies for climate-smart farming, or innovative farming practices. That investment in research I consider critical.

Then we also need to focus on market access.

We can no longer rely solely on our traditional markets, so significantly more investment needs to take place there. And unfortunately, government support is limited, and progress isn’t necessarily happening quickly enough. There is a heavy reliance on private-sector industries regarding this research and its funding.

RYK VAN NIEKERK: Farming is of course expensive, and the risks are high. How is the agriculture funding sector adapting to the scenario you’ve outlined?

DANEEL ROSSOUW: I think financial institutions have a crucial role to play in helping agriculture navigate these long-term challenges and transition toward a more sustainable sector.

I’m not just talking about mega farmers; everyone from smallholders to large commercial operations is impacted by these changes.

As we discussed at the AgBiz Congress regarding new approaches to finance, traditional bank support alone will no longer be able to sustain the scale of transformation required.

So we see the future of agricultural finance as much more partnership-driven.

This means combining the commercial bank financing we currently offer with development finance institutions, state guarantees, for example, and private capital.

In other words, a more collective approach to funding and strategic partnerships.

So the role of a bank should, I think, ultimately be seen as an enabler of investment, growth, and sustainable practices – which we can also drive through our lending criteria.

Financing strategy is essential, and the large investments we see must align with production cycles. We cannot escape that.

Cash flow remains incredibly important, alongside a long-term business strategy to ensure growth and financial sustainability over time.

We are certainly seeing the role of banks shift toward providing more strategic direction, particularly regarding climate-smart practices.

RYK VAN NIEKERK: Daneel, thank you very much. That was Daneel Rossouw, head of sales at Nedbank Agriculture.

Brought to you by Nedbank Agriculture.

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