SUNDAY TIMES - Fresh-produce farmers cast wary eye on rand, rainfall
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Sunday Times Business By ANDRIES MAHLANGU, 2017-04-16 00:00:00.0

Fresh-produce farmers cast wary eye on rand, rainfall

EASY ON THE PALLET: Onions and potatoes on the move at Joburg Market, formerly the Johannesburg Fresh Produce Market, which serves about 5000 South African farmers.
Image: RUSSELL ROBERTS

Fruit and vegetable farmers in the Western Cape will be hoping for good rains this winter to replenish dams and enable the province to maintain its share of supplies to the country.

Unlike other parts of South Africa, which have experienced widespread rainfall in recent months, the Western Cape is still beset by drought, which affects those vulnerable fruits and vegetables that are largely produced under irrigation.

"The [drought] situation is a concern in the sense that it could affect supply and the pricing of fresh fruit and vegetables," said Michael Cordes, general manager for the Institute of Market Agents of South Africa, which represents market agents of the country's 22 fresh-produce commission markets.

The fruit and vegetable sector, which generates R39-billion in annual turnover, forms part of the wider horticultural sector. Excluding exports, the fresh-produce commission markets generate around R16-billion a year.

Nearly half of the vegetables produced in the country are sold through fresh-produce markets, which have recently drawn attention from the competition authorities for suspected collusive behaviour.

Last month, the Competition Commission raided the premises of at least nine fresh-produce market agents, which serve as intermediaries between farmers and buyers of fruit and vegetables.

The agents are suspected of being involved in cartel and price-fixing conduct in contravention of the Competition Act.

It is alleged that the agents - which include RSA Group, Subtropico and Dapper Market Agents - are involved in prohibited co-ordinated activities aimed at undercutting the prices charged by smaller intermediaries.

According to the commission, the suspected agents collude to keep their prices unsustainably low during certain periods in the trading day and quickly increase prices significantly as soon as the smaller agents run out of stock.

Certain volumes of stock are held back for sale late in the trading day in order to further manipulate prices.

The wholesale price of vegetables, including potatoes and onions , is set daily , based on supply and demand .    

In the case of fruit, about 50% of all agricultural exports from South Africa comprise fresh fruit, making it a significant foreign-exchange earner, according to FNB senior agricultural economist Paul Makube. About 6.5million tons of fruit are produced annually.

Jacques du Preez, general manager for trade and markets at Hortgro, said the drought in the Western Cape and volatile rand were some of the key concerns in the deciduous fruit industry.

The weaker rand flatters revenue that is estimated at R10.4-billion a year, but also inflates production costs such as fuel, fertiliser, chemicals, transport and shipping.

Deciduous fruit, including apples, pears and stone fruits, is mainly produced in the Western Cape, which is home to 1216 apple, pear and stone-fruit farmers.

The province produces about 75% of the country's deciduous fruit, which is mainly destined for export markets, including Europe, Africa, the Middle East, Far East and Asia.

"We would prefer a stable rand for planning purposes. Dam levels are at critically low levels, which is a concern because the fruits are produced under irrigation. We would be able to see through this season but we are primarily concerned about the influence of the drought on next season's crop," Du Preez said. The production season for stone fruit runs from October to mid-April, while that of apples and pears runs from January to mid-May.