We know that the agriculture sector can be helluva difficult to penetrate as a start-up farmer, but with resilience and dedication, you too can be a rising farming star.
High-potential new farmers can even crack global markets if they make a couple of clever business moves. Food For Mzansi asked experts for their five top tips to export your fresh produce. And guess what? It’s not always that difficult.
1
Types of produce to export
Every year, there are new markets for fresh produce bearing in mind that consumer preferences are ever-changing. A lot of research needs to go into your planning if you want to export on the global market, and producers have to adapt to changing trends if they wish to remain relevant.
Uzair Essack, managing director of fresh produce supplier and distributor Riyp, recommends that first time farmers and exporters should concentrate on fresh produce that are popular exports on the global market and that come from South Africa.
“When you are starting out, its best to stick to the popular items that South Africa (already) exports,” Essack says. “So, that will be your citrus and deciduous fruit, such as apples, pears and grapes.”
This is because there is a lot of information already available on growing and exporting these fruits on the global market; a great resource for new farmers. These are also considered fruit that lasts.
On the other hand, this might be your downfall. If you want to take a bit of a risk to stand out on the global market, you need to find niche fruit or vegetables that not many people are doing.
2
Research your markets well
Every market has its own characteristics, and you have to be aware of what these are, says Essack. He speaks from experience as the head of a global company supplying and distributing fruit, vegetables, and other products locally and abroad.
“For example, in Europe your money is safe, but they don’t pay the highest prices. The Middle East will place an order with you, but if you do not have the right contacts you will lose money. Russia needs a very specific strategy, and with Africa I always recommend money up front, nothing else.”
It’s important to know the pros and cons for each market. Each market will provide a different sense of security for the safety of your payment versus your profit margin.
“The agent has to trust the buyer to make the payments,” says Anton Kruger, CEO of the Fresh Produce Exporters’ Forum (FPEF). “There are many unscrupulous buyers.”
Another market detail to consider is the demand from the different countries, as well as the specific requirements of exporting fresh produce to them.
There are food safety considerations, according to Kruger. With every importing country banning different chemicals, or requiring specific regulations to be followed before they can accept the produce.
You also need to consider which produce the markets take, the sizes and specifications of quality they demand, and even the packaging they prefer.
3
Risk and losses
“There are many challenges and risks in the fruit export value chain,” says Kruger. “The product is perishable, has temperature requirements and can be on the sea for two to four weeks depending which country it is going to.”
“There will 100% be losses,” Essack agrees.
So, as an aspiring fresh produce exporter, you need to keep this in mind.
There are risks of quality claims once the produce arrives in the destination market, where a portion of the container’s quality has deteriorated and therefore the fixed price may be decreased. There is also the risk of losing the whole sale if you did not follow the right protocols for the market you are exporting to.
The fruit and other fresh produce that you export will be tested and, should it test positive for banned substances, the whole container of produce may be destroyed.
4
Mitigating risk and loss
“As an exporter the most important part is to try and mitigate your losses,” says Essack. “A successful year means you have cut your losses as much as possible.”
When working with exporters that ship larger volumes, entry-level exporters are able to spread their risk, whereas a quality claim can have a big impact on an exporter with small volumes, according to Kruger.
“It is vital that exporters mitigate and manage risks using instruments such as marine insurance, credit guarantee insurance (which sometimes is not granted in emerging markets) and food safety and quality management systems,” advises Kruger.
“On the markets that do offer credit insurance, I recommend getting insurance on those customers,” says Essack. “So, if they don’t pay you, you at least have cover for certain portion of the fruit or payment.”
In order to mitigate the risk of losing money on the quality of the product, Essack recommends to not only use farm and PPECB quality control, but also use your own method of quality control to make sure that the fruit is leaving in a good condition.
You can also use independent quality inspectors who charge around R1 000 per inspection.
The other way you can lose money, is with shipping and temperature issues, says Essack. “It is important to have good and strong insurance that covers you for any shipping issues.”
5
Building solid relationships
“It is important to have a good relationship with your customers,” says Essack. “That’s one of my favourite parts of the job. I try to visit every customer at least every second year just to maintain that relationship.”
According to Kruger there are basically two ways in which export agents work.
In the one option, export agents earn commission on a transaction between a grower and an international buyer, where the goods belong to the grower until they reach the buyer’s side. The exporter deducts all costs incurred in the value chain, including their commission from the sales value and pays the balance to the grower on completion of the transaction.
“Here, the risk lies mainly with the grower,” says Kruger. “This is equivalent to a grower entrusting the agent with approximately R500 000 in sales value for one container, give or take. It can be less for citrus or more for blueberries.”
“Hence, it is not easy for the grower to trust a new export agent with their produce.”
The second option, which transfers most of the risk from the grower to the agent prior to export and reduces the level of trust required by the grower, involves the purchase of the fruit upfront by the importer at a fixed price. This is the method that Essack recommends to mitigate potential risk.
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