<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
RYK VAN NIEKERK: Regenerative agriculture is receiving more and more attention. Now, this broadly concerns farming practices that, among other things, improve soil health, use resources more efficiently, and can make farms more resilient against difficult conditions.<\/p>\n
The reality has also already shifted from whether farmers should embrace regenerative agriculture to how quickly they can do it, and how they should finance it.<\/p>\n
Daneel Rossouw is on the line. He is the head of sales at Nedbank Agriculture. Daneel, a very warm welcome to the programme.<\/p>\n
Let\u2019s start with the money. It takes substantial investment for a farming operation to switch over to a regenerative agriculture strategy. How should farmers approach this, especially because it takes a few years before the benefits materialise?<\/p>\n
DANEEL ROSSOUW: Thank you, Ryk, it\u2019s always nice to discuss what I think is a very important topic. So I think the question in terms of how farmers should approach this, and also to a certain extent how we as funders should approach this, is how we view regenerative agriculture.<\/p>\n
Do we still view it as an environmental initiative or do we view it as a security risk, with more cash flow and asset protection strategy?<\/p>\n
I think we are moving much more in that direction, because that also to a large extent means that we as funders can then support this investment.<\/p>\n
So I think the goal is naturally to help our farmers invest in farming practices and technology that reduce tillage, and improve margin protection as well as the debt-servicing ability.<\/p>\n
But we must then also ensure that there can be extra capital in terms of the resilience needed in this type of business \u2013 without undermining short-term liquidity.<\/p>\n
We know that farming operations differ from one another, and each project is different. So from our side it\u2019s precisely about looking \u2013 if I can speak from a funder\u2019s perspective \u2013 around how we best can finance it to protect cash flow.<\/p>\n
That may mean that you now fund what we will first see as the result only after a few years \u2013 in other words, that future yield that we have to bring into calculation.<\/p>\n
That means that we must be very creative in terms of the relationship between short-term and long-term capital, and it may also mean that we must look, for example, at capital moratoriums for the first two or three years.<\/p>\n
But I think it\u2019s important to note that every farming operation is different, whether we are talking about a grain farmer or talking about a producer of shrubs or trees, because they are going to have to undertake various projects that differ from one another.<\/p>\n
So on an individual client basis we look at how we can finance a farmer. Then the question naturally is: can we do it alone?<\/p>\n
RYK VAN NIEKERK: Yes, that\u2019s the next question. A farmer is going to say to you: \u2018Yes, this is going to cost me a lot of money. I will have to be responsible for the repayments. I\u2019ll carry the risks.\u2019 Is that the model?<\/p>\n
DANEEL ROSSOUW: Yes, and that also came out in a panel discussion we had at Nampo Cape about two weeks ago in terms of how we see involvement throughout the entire value chain.<\/p>\n
So I think we must say to ourselves that no partner or stakeholder can solve that challenge alone, but as a collective \u2013 with the farmer in the middle naturally.<\/p>\n
Here we are looking at funders, as well as the impact of food companies which are becoming increasingly important, and then input suppliers \u2013 who all form a part of this whole financing and support roadmap, if I may call it that.<\/p>\n
So the whole discussion was about what everyone could do to share risks, because it really is about sharing risk as well as creating incentives for farmers.<\/p>\n
I think there is still a lot of work to do around that, and then as a collective to be able to support farmers through the transition. Not just as a funder; it\u2019s through the entire value chain.<\/p>\n
RYK VAN NIEKERK: Can you give us an example of the responsibilities that each link in that chain has to assume?<\/p>\n
DANEEL ROSSOUW: Yes, it is very interesting from the input side \u2013 for example, let\u2019s say to measure is to know \u2013 the involvement of input suppliers and especially data companies which will closely examine soil health, for example.<\/p>\n
Now unfortunately that account will load the account \u2013 but that is short-term in nature. So that is perhaps something that will fall more on the producer\u2019s side.<\/p>\n
But I think being able to use that data critically \u2013 for us as funders, as well \u2013 throughout the value chain becomes increasingly important.<\/p>\n
But then consider the support of the offtaker in terms of those incentives that can be offered if we deliver a very specific product to the market.<\/p>\n
That is still an elementary consideration.<\/p>\n
So I think there is still a great deal work to get done in terms of how we can give support throughout the value chain.<\/p>\n
But it is about also going to look at that transition phase and then the comfort that we as a funder have \u2013 for example around the offtaker portion of a product that will give us that comfort and peace of mind to be able to support where we won\u2019t necessarily yet see the entire yield.<\/p>\n
But Ryk, this really is in its infancy, and I think we are now on a very interesting path in terms of how it could play out in practice.<\/p>\n
RYK VAN NIEKERK: Yes, how you explain it is interesting. The traditional agricultural financing model has changed a lot in recent times, especially in the current context of the investment that regenerative agriculture requires.<\/p>\n
DANEEL ROSSOUW: Yes, it is about shared risk. But it is also about sharing technology and the use of technology throughout the value chain.<\/p>\n
Very interesting discussions take place around that, as well as about how we as funders support our clients and encourage them \u2013 specifically to use data, to do analyses \u2013 because I think the next step is how funders are going to use that within their credit processes, for example; to include data in the process.<\/p>\n
We are entering an El Ni\u00f1o phase, so current discussions also revolve around climate, and there are incredibly good technologies currently available that may not necessarily be used in the way we use them at this point.<\/p>\n
RYK VAN NIEKERK: Daneel, thank you very much. That was Daneel Rossouw, head of sales at Nedbank Agriculture.<\/p>\n
Brought to you by\u00a0Nedbank Agriculture.<\/p>\n
Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.\u00a0<\/p>\n
#Financing #regenerative #agriculture #sustainable #farming<\/p>\n","protected":false},"excerpt":{"rendered":"
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