Signposts in vegetable production

An understanding of what’s happening in the SA vegetable industry is crucial when making production decisions. we would like to make you attentive of important ‘signposts’ in critical areas of VUP production in SA – and advise you to stop and consider your choices at each.

In summarising this article:

• Higher yield and pack-out are essential for survival. What do you need to adjust to ensure you achieve this? • Generally profit margins are a lot tighter and are nowadays similar to those in modern agri-business. With this in mind, should one restructure ones whole production enterprise?

The signpost; “NO MORE IDEALISM” in VUP in SA

Even today, there are still amazing stories of how much money you can supposedly make quickly by growing vegetables under protection, and also of the wonderful lifestyle one may enjoy. Although the “big bucks” is sometimes possible, it is definitely the exception and not the rule. So when you hear someone saying “put up some tunnels, plant tomatoes/cucumbers/peppers, break even in the first year and hit the big time,” then see this in the context of: • A 3 – 5 year financial plan, • A conservative business plan based on reasonable returns, • An accurate market assessment and ready markets, • A cohesive budget linking costs, capital requirements, turnover and nett profits etc. • Lastly, note that many producers only break even after the third year of production! Notice all the buzz words used: financial plan, business plan, returns, market assessment, budget, capital, turnover etc. Not once yet mention was made of any aspect of undercover production (although this is intrinsic to the plan). The point is - that this is about good solid business, and that business just happens to be growing or “manufacturing” vegetables under plastic or shade cloth, and then selling these vegetable products into the markets. We in no way belittles the passion with which we all farm and some of our reasons for doing it; driving arm out the window and experience wind in our face, wide open spaces, working with plants and nature, the sense of order and security that comes from viewing rows of well-structured tunnels or shade-houses full of green crops, the sight of “red” gold being packed into crates, punnets or value packs etc.. At the end of the day our passions must be directed into financially profitable businesses, and the business side is more important than our passion for vegetable production and its “supposed lifestyle”. Get back to earth; “NO MORE IDEALISM” in vegetable production in SA! Another big signpost is transport costs When choosing a new farm and what crops to grow, what structures to erect, make sure that the profit margins and volumes supplied can cover transport expenditure. Given current prices of fuel, the grower who is only 50km from his market is far better of than the grower more than 150km away, never mind more than 300 km from the markets. Given similar hectares, yields and pack-out and other input costs, the grower closer to the market will pay about a third of the transport costs per kg than the grower 150km away. Even though the “further away” grower might have cheaper labour costs due to being further away from the city centres – he will be under more pressure to add value to his products so that increased transport costs can be offset by a better price per kg of product. The further than 150km away grower will also have to give far more attention to cold chain logistics, so that trucks are always full to minimise transport costs per kg of product. Thus his/her time spent on quality crop production and other aspects of management could become less. The third signpost is traceability. Everybody is talking about traceability and admin and records and systems and so on…. It can be quite off-putting. Match your level of traceability with your customer requirements! Most traceability issues currently relevant revolve around safety and chemical use. The choices can be seen from a couple of business angles. 1. Your customers do not require traceability therefore you simply do not introduce any system to trace products or production. You only tackle this if and when required. This typically applies to many products delivered to the fresh produce markets or outside main chain stores. 2. Your customers do not require traceability but you put the basics in place so that you comply when eventually required, or you use your traceability systems to canvas new business. 3. Your customers require Europgap and traceability. You can either go the whole way or give them the bare minimum. This is typical of most production going into retail networks or export. For various reasons most vegetable growing enterprises tend to only supply that which is required and only put in place systems and processes to supply that only which is requested. Whatever one decides to do – the question must be asked and answered! To wrap this up – face these three signposts and ask yourself the questions. • Do I grow vegetables because I really enjoy the lifestyle and can make a lot of money one day, or is my vegetable enterprise based on solid business principles which are applied and monitored? • How am I positioned regarding transport issues and related costing with respect to my products, markets and profit margin? What has to change? • How do I need to position my vegetable business on matters of traceability? Answer these or seek information to make your fresh produce enterprise profitable and secure in the market you aim for. By: Derek in Forum Articles