South Africa’s commercial farmers have to start planning for the increased possibility of less-than-ideal climatic conditions by embracing sustainable farming practices, says Nedbank Capital Africa Business head of agricultural commodities Zhann Meyer.

In a recent statement he said the impact of environmental challenges, particularly climate change, on the South African agriculture industry was most evident in the country’s maize industry.

“In the past, when the country enjoyed more predictable weather patterns, farmers might have been able to get away with investing large sums of capital into planting and then simply hoping that the 'weather gods' would be kind to them. These days, however, such an 'invest-and-hope' approach is almost certainly a fast track to bankruptcy,” Meyer noted.

He stressed that a detailed scientific and calculated approach was essential, not only to increase yields, but also to limit losses. This would allow farmers to maintain good working relationships with the country's financial institutions, which continued to be vital partners in the success of any commercial farming enterprise.

While there were many sustainable practices modern South African farmers could adopt to mitigate climate and other risks, there were a few non-negotiable components of lasting farming success.

“For starters, it is time that every commercial farmer in South Africa accepts the responsibility that he/she has to embrace technology fully, adopt scientific farming practices and understand optimal price-hedging structures and varying opportunities in a dynamic environment,” Meyer noted.

A more scientific approach was especially important for farmers who recognised the imperative to mitigate against the potential for sustained lower rainfall in the future. In this regard, it was vital to invest in technology that aided the analysis of soil profiles, checking of pH levels, mapping moisture levels and limitation of wastage as a result of planting in suboptimal soils.

Linear steering technology – where a tractor effectively steered itself using satellite tracking and soil profiling to reduce tilling and improve planting efficiencies – was a prime example of such investment for the highest possible long-term yield, commented Meyer.

“Of course, this is expensive technology, but forward-thinking banks are becoming increasingly open to financing it, provided farmers are able to demonstrate the levels of sustainable planning that can increase its effectiveness and returns over time.”

Sustainable farmers also understood the responsibility they had to optimise their financial matters – most significantly the price they could get for their crops. This was best achieved through the third-third-third pricing approach, which Meyer said was essentially “a good way of ensuring that, when it comes to price optimisation, you are right at least two-thirds of the time”.

The approach involved doing nothing with the first third of your crop and exposing yourself to the vagaries of the market, hedging your price on the South African Futures Exchange with the second third and, with the final third, hedging by way of buying put options; “giving you the right but not the obligation to deliver in a bear market, thus, limiting your downside with no cap on the upside”, said Meyer.

He explained that this pricing approach was not dissimilar to the widely accepted equity investment approach of diversifying a portfolio. Not only did it afford the farmer the highest, risk-controlled potential for maximum returns, but it also offered real protection against the otherwise financially devastating impact of volatile and unpredictable markets.

The final non-negotiable component of truly sustainable farming was insurance. “While it would be unrealistic to recommend that every farmer should hold expensive multiperil insurance, using the cost of insurance cover for hail as an excuse for not taking out any insurance is a very dangerous approach, particularly given the unpredictable and fast-changing weather patterns that now exist across the country as a result of climate change,” Meyer advised.

Given the myriad challenges today's farmers faced, he stressed that farmers need not attempt to master all things, suggesting that they rather be prepared to outsource some functions to the relevant experts to focus on consistently growing the best quality crops with the highest possible yields in the most sustainable manner.