The Sunday News
Mhlupheki Dube
IT is indisputable that the economic challenges obtaining in the country are affecting the productive sectors such as agriculture.
The main challenge is the rising input costs compounded by inflation. Consequently, I get a lot of questions from distressed farmers especially livestock farmers seeking advice on how to navigate this complex operational environment.
Chief among the questions is how should they sell their animals without the risk of going under and what currency should they demand to be paid in? It is a fact that because of the instability of local forms of payment farmers are slowly gravitating towards hard and more stable currencies such as the US dollar and the rand depending on which region of the country one is in.
In the southern regions, the rand has almost become the de facto trading currency with goats going for anything between 500-1 000 rand while the US dollar is the preferred trading currency in the northern parts of the country. A few weeks ago, I attended a market day in Buhera and livestock farmers were refusing other forms of payment accepting only the US dollar.
I am not an economist and hence not qualified to offer technical advice in that field but what is self-evident is that it is increasingly becoming difficult for formal buyers in the livestock sector to trade as the producers are resisting local payment forms.
This will result in the market starving as the offtake levels drop and the price of beef for those outlets that will be having it will shoot through the roof, making it even more unaffordable than it already is. In normal times consumers have tended to migrate to other forms of meat such as pork and poultry, mostly poultry but unfortunately this time around even the poultry will either be in short supply or unaffordable as well because the feeds have gone up beyond the reach of many cottage small-scale producers.
A 50kg bag of poultry feed is selling above $160. My advice therefore, to the smallholder livestock farmers is to sell when it is absolutely necessary and to negotiate a better deal in whatever currency or form of payment you have agreed to. If you have access to buyers who can give you more stable currency go for it.
Livestock production is a business and therefore, one needs to make sound business decisions. While a system will always find an equilibrium and settle after a wave of instability, we pray for the powers that be to find means of halting the inflation that is making production difficult and almost disabling all the value chains in the agriculture sector. Livestock production has become a huge investment and a means of storage of value for many people in the country due to the volatility of the banking sector.
It is no secret that most people are keeping their money in livestock and only redeeming it for cash when they have to and hence if it becomes impossible for a farmer to redeem his investment, the value chain becomes dysfunctional and many other downstream sectors get affected.
Major players in the offtake side of the livestock value chains have to find innovative means to function and be able to offer farmers what they are demanding in terms of payment options. This may not be easy but failure to do that may drive some of the major buyers such as abattoir operators out of business.
It is undeniable that the livestock sector is increasingly self-dollarising and players in that sector have to find means of surviving in that environment or they will fold. The prevailing situation for example is that livestock farmers now prefer to sell among themselves because they can demand and be paid in stable currencies.
Of course, this is small-scale trading in terms of volumes of animals sold as such a market easily saturate, however, it is telling about the direction which producers are taking. It is my prayer that the market will eventually find a more amicable solution for all the players in the industry so that everyone remains in business and no one folds because the operational environment has become unbearable for them.
Uyabonga umntakaMaKhumalo.
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