Looking at the price of potatoes in Mzansi, you would think that potato farmers are laughing all the way to the bank. Kanti, it’s the retailers who are making a killing in potato sales, while growers walk away with almost nothing.
At the time of writing this article, South Africa’s farm-gate price (the price farmers sell at) for potatoes averaged at R34 for a 10kg bag. However, it was identified that consumers are paying anything between R70 and R90 for a 10kg bag.
To better understand current potato market dynamics and the cost to farmers and consumers, Food For Mzansi spoke to Jaco Koekemoer, marketing manager for Potatoes SA.
He breaks down the reason why prices are so unbalanced, why there is such a high volume of potatoes in the market, and what their way forward is.
Duncan Masiwa: What’s happening and why are we seeing these unfavourable potato prices?
Jaco Koekemoer: The potato producer price is currently under a lot of pressure because there are too much potatoes in the market.
The reason why there are so many potatoes in the market is partly due to the extreme heat that forces farmers to harvest much earlier than planned. Loadshedding also caused great havoc with irrigation planning.
So, the price farmers are getting for their potatoes are actually very low… A farmer normally gets a at least half of the price that’s available on retail. So, typically if you pay R15 per kg (loose sell), then a farmer should traditionally get at least R7.50 per kg according to stats SA’s report.
It was picked up that farmers are currently getting less than R5 of that R15.00.
Farmers are already under such severe pressure. How’s this making matters worse?
In South Africa, our average yield is about 45 tonnes per hectare and the input cost can be anything between R200 000 and 250 000 per hectare.
So, already there’s a lot of money involved. Then there’s packaging, and another big cost is transport from the farm to the fresh produce market.
When the stock arrives at the fresh produce market, there’s a commission payable by the farmer which varies between 10% and 12.5%.
A market agent will traditionally take between 5% and 7.5%, and the rest goes to the municipality because all the fresh produce markets belong to the local municipality.
This equates to millions of rands going to the municipality, while little to no upgrades being done at fresh produce markets.
So what’s a fair price, Jaco?
We believe that a farmer cannot be financially stable if they get R5 per kg in their pocket. Between R6 and R7 per kg is what farmers are supposed to be getting for their potatoes.
At the prices that was recorded the farmers were delivering at a loss.
If you look at the current prices and you deduct the packaging, transport costs and the agents’ cost, then actually at this stage, the farmer is not making money.
ALSO READ: Vegetable prices skyrocket with no end in sight
And the impact on the South African consumer…
We need to make the consumer more aware of what’s going on. They need to understand what the input cost to the farmer per hectare is. The potato farmers are not the ones making the money, it’s the people adding value that are actually making the money.
With this type of skew margin distribution the risk is that the actual profit only belongs to the value adding-parties.
Retailers also need to keep the farmers’ sustainability in mind.
If we can focus on the right information for the market, that will help a lot. It is important for retailers to be well informed of the conditions prevalent on farms that might affect the availability of products.
The South African potato industry is currently in negations will all major retailers in South Africa except for one. We are sharing this information with them and what the input costs are, so that we can actually secure the future of the farmers and provide for affordable food to the consumer.
If retail, formal and informal actually start to understand what the input costs are, and we can get a more stable price right through the year, that will help a lot.
What’s the suggested way forward?
We can make people aware of what the current market prices are but we cannot tell them what they should retail at.
We are starting to tell South Africans what the market price is and that they should do more active price comparison.
I am hopeful that the market will improve soon and become more favourable towards potato farmers.
Sign up for Mzansi Today: Your daily take on the news and happenings from the agriculture value chain.
