Business Day (Johannesburg)
COLUMN
27 June 2007
AGRIBUSINESS Senwes has got away with good results for at least two years of difficult farming conditions -- first because of poor prices which affected maize planting and then because of a drought, which affected the maize yield -- but it knows the game is up.
It warns that for the year ahead its grain handling and storage business will take strain as a result of the reduced harvest. This will have knock-on effects on farmers' disposable income, much of which is spent at Senwes's retail and mechanisation businesses. Forecast higher interest rates are also expected to curb farmers' spending.
AGRIBUSINESS Senwes has got away with good results for at least two years of difficult farming conditions -- first because of poor prices which affected maize planting and then because of a drought, which affected the maize yield -- but it knows the game is up.
It warns that for the year ahead its grain handling and storage business will take strain as a result of the reduced harvest. This will have knock-on effects on farmers' disposable income, much of which is spent at Senwes's retail and mechanisation businesses. Forecast higher interest rates are also expected to curb farmers' spending.
A far more serious threat to Senwes is a general threat to agribusiness: if farmers find that their terms of trade (the ratio between the rise in input costs and the increase in farm-gate prices) deteriorate beyond sustainability, businesses who turn a profit from trading with farmers will be hit hard.
While it is likely that consolidation will see more farmers pack it in, that will not change the structural conditions. It is more likely that farmers will seek a different model to stretch their terms of trade by extending their farm-gate delivery into processing. Does that sound like a revival of the old farm co-operative model. Uncannily so, yes.
COLUMN
27 June 2007
AGRIBUSINESS Senwes has got away with good results for at least two years of difficult farming conditions -- first because of poor prices which affected maize planting and then because of a drought, which affected the maize yield -- but it knows the game is up.
It warns that for the year ahead its grain handling and storage business will take strain as a result of the reduced harvest. This will have knock-on effects on farmers' disposable income, much of which is spent at Senwes's retail and mechanisation businesses. Forecast higher interest rates are also expected to curb farmers' spending.
AGRIBUSINESS Senwes has got away with good results for at least two years of difficult farming conditions -- first because of poor prices which affected maize planting and then because of a drought, which affected the maize yield -- but it knows the game is up.
It warns that for the year ahead its grain handling and storage business will take strain as a result of the reduced harvest. This will have knock-on effects on farmers' disposable income, much of which is spent at Senwes's retail and mechanisation businesses. Forecast higher interest rates are also expected to curb farmers' spending.
A far more serious threat to Senwes is a general threat to agribusiness: if farmers find that their terms of trade (the ratio between the rise in input costs and the increase in farm-gate prices) deteriorate beyond sustainability, businesses who turn a profit from trading with farmers will be hit hard.
While it is likely that consolidation will see more farmers pack it in, that will not change the structural conditions. It is more likely that farmers will seek a different model to stretch their terms of trade by extending their farm-gate delivery into processing. Does that sound like a revival of the old farm co-operative model. Uncannily so, yes.
Source : http://allafrica.com/stories/200706270102.html
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