Safeguarding operations against the unexpected – African Farming

A wetter-than-usual summer has been a mixed blessing to farmers in the summer rainfall areas. Some regions experienced flooding and farmers were forced to delay planting or, in some cases, switch to another commodity. African Farming presenter Tony Ndoro asked Nico Groenewald, Standard Bank’s head of agribusiness, how farmers could safeguard their operations against the unexpected.

Farmers need to adapt fast in a high-rainfall season like the one we have just had, says Groenewald. A changed environment will almost definitely have an impact on cash flow, and farmers need to communicate with their banks or financial institutions about alternative strategies.

“It’s common knowledge that most of the inputs are financed by banks and other commercial institutions like the co-ops. Farmers need to inform them of altered plans so that they can keep abreast of developments,” he says. 

From a crop-cultivation perspective, a wet season is better than a dry season, and farmers can adapt more easily in a wet year than they can in a year of drought, Groenewald explains. 

“At an early stage, when farmers start changing their plans, they should inform their banks. A change in crop can mean a change in costs, so the finance guys must know about it,” he says.

He points out that a switch, for example, from maize to sunflowers will mean an adjustment to the time of harvest, resulting in the cash coming in later. “All the stakeholders must be on board with this,” Groenewald adds. Communication is critical when farmers are dealing with their lenders, and keeping the banks informed does make a difference. 

The commercial institutions provide credit to a diverse agricultural sector and are up against challenges of their own that are not insignificant.

While the sector’s appetite for risk is said to be small, farming is inherently a fairly risky business and most of the country’s farmers are financed by commercial lenders. It certainly makes good sense for farmers to take their lenders with them on a journey of change. 

For more information on Standard Bank visit www.standardbank.co.za