Commercial farming is arguably the most technologically advanced industry globally. However, this achievement exposes it to a multitude of risks, warns Maluta Netshaulu, a leading agricultural economist and banker. He says the adoption of technology by farmers was informed by the need to optimise production, improve efficiencies, and mitigate risks.
South African farmers are finding it difficult to survive of late, especially due to resource unavailability such as energy. The reason why this is the biggest problem in agriculture now is because the agriculture sector as a whole has pegged its growth on energy as a factor of production and enabler.
Think of the poultry sector for example. This sector used to be very basic and employed innovation as opposed to technology to make production possible. What do I mean by “innovation”?
I mean, if one looks at the structures that were used to produce chickens or broilers before the fully environmentally controlled structures used these days, one will realise that though basic in form, they were innovative as they allowed the temperature to be controlled through a manual process such as opening and closing of the curtains.
The challenge, of course, was that on very hot and cold days, the stock was under threat of overheating on hot days and freezing on cold days. The production cycle was also longer than it currently is. So, the business case for the sector to adopt the fully environmentally controlled broiler houses was strong.
These structures have allowed the poultry industry to grow in leaps and bounds even against the escalating production costs and constant threat from competition from other countries dumping their products in South Africa at prices that undermine the viability of the sector.
That said, the adoption of these technologically advanced production systems meant an increased reliance on energy from the grid to:
a) control the temperature in the structures for optimal production;
b) supply food, water and medication to the chickens through the feeding system; and
c) monitor production performance through systems.
Nightmare for poultry farmers
For a country such as South Africa which is struggling to keep the lights on throughout the day, poultry production is proving to be an impossible and ultimately costly task. Impossible, because to produce, the farm needs to have a reliable energy supply. Costly because when the farmer is not able to meet market requirements (such as weight per chicken), the contract can be terminated which puts the farmer’s livelihood at risk.
Over the past weeks and months, a number of stories have been circulating that speak to the damage the energy crisis is having on the poultry industry. One that made much noise was KFC indefinitely closing 70 of its outlets due to a shortage in chicken supply.
The other story which grabbed the headlines was the slaughtering of 10 million chickens within a month due to not meeting market specifications and suffocation. The other was that of a farmer in North West that was talking of taking the government and Eskom to court over the loss of his production due to load shedding.
Yes, but …
A person that doesn’t understand the sector well could insinuate the following:
- Why don’t these farmers just adopt alternative energy like generators or renewable energy?
- How about they go back to the old way of production, using curtains which will reduce reliance on the grid for production?
Firstly, the margins of poultry production are extremely thin. The only way to make money is through scale. It is a volume game. If you are making R1 or R2 per chicken after paying some of the direct costs (mostly supplied by the off-taker and deducted on payment) and you still need to pay the electricity bill, labour and indirect costs such as security, bookkeeper and debts, how on earth are you going to afford capital expenditure items such as a generator or renewable energy.
Especially given the sheer magnitude of energy these systems require, the farmer will need top of the range systems – and if we are talking renewable energy, a battery system will be required to be able to operate the broiler houses even at night.
I am not saying it is not possible to install these systems. All I am saying is that most poultry operations would find it difficult to afford the repayments of these systems if under debt finance.
Okay, so why don’t they just go back to producing like they used to – in broiler houses with curtains? Well, they can do that but as I have outlined above, the complexity and the risk that comes with those houses are also high.
In fact, some broiler operations are still on those structures. They are probably not feeling as much of a pinch as the fully- or even semi-environmentally controlled houses. However, in terms of productivity and possibly cost efficiency, the new systems are probably more advantageous as their daily Feed Conversion Ratio (FCR) could be better.
Many sectors suffering
The poultry industry could be making the headlines now, but it is not the only agricultural sector that is suffering as a result of load shedding. Other sectors are irrigated field crops (such as maize, sugarcane, etc), tree crops (citrus, wine, avocado, etc) and secondary agriculture enterprises such as packhouses, manufacturing and bottling facilities, wineries, distilleries, etc.
So, if for argument’s sake, agricultural production was still conducted in medieval ways like the manual broiler houses and flood irrigation, would it then be in a better position to withstand the energy crisis the country is currently contending with? My honest answer is yes, but it would undermine the gains made to meet the nutritional requirements of a growing population.
In the end, the sector is very much inseparable from technology. It makes things happen – facilitates optimal production, reduces costs, extends produce shelf life, and saves precious resources like water.
To make technology a blessing for the agriculture sector, continuous innovation, and collaboration across the value chain and supporting sectors and partners such as government and financial institutions are required for the development of innovative and cost-effective solutions that facilitate a thriving and resilient space.
- Maluta Netshaulu is an agricultural economist, banker, thought leader, husband and father. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or positions of Food For Mzansi.
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