Challenges and Opportunities
The food and fibre industry is one of the most important sectors in the South African economy. Not only does it provide the basic products and resources to feed and clothe the population, it contributes about 15% of the South African gross national product and provides employment for about 1,2 million workers and a livelihood for about 6 million people. Food and clothes are and will remain one of mankind's primary needs, and this means that any person that is trained in, or studies agriculture, fibre or food disciplines will always be guaranteed of certain job opportunities. The food and fibre industry not only consists of farming at the farm level, but includes all the industries that provide inputs to the farmer, as well as services such as financing and training. The industries that process and market agricultural products also form part of this important sector.
Within this sector, the agricultural economist plays a vital role. The agricultural economist has multiple roles, and can work at the micro- or the macro-level. At the micro-level, i.e. on the farm, the agricultural economist is involved in all matters that are related to resource use, management, production, processing, distribution and the use of agricultural products. The agricultural economist analyses aspects of financing, the allocation of inputs and resources, all in an attempt to maximise profits. Certain agricultural economists are involved in the marketing of food and fibre and the trading that is involved through different channels until it reaches the end user. Both local and export markets are involved.
A major challenge facing South Africa is the development of rural areas, many of which are seriously disadvantaged. Agricultural economists are well-placed to meet these challenges and to work with governments to develop agricultural policies to promote income growth in poor areas. The national and provincial Departments of Agriculture are both important employers of agricultural economists, who are involved with many varied tasks. Agricultural economists participate in the development of strategies designed to assist farmers who may previously have received little assistance from agricultual extension workers. Work on developing such strategies has many elements, from promotion and market development through to pricing policies and agricultural finance.
Agricultural economists also have an important strategic role to play in the private sector. At a macro-level, agricultural economists are employed by multinational food companies and export organisations to analyse the factors that influence the trade of agricultural products. Agricultural economists' knowledge of the macro-economic variables, such as inflation, exchange rates, interest rates, puts them in a position to identify the effects of various macro-economic policies on the food and fibre industry, and eventually on the whole population. The multidisciplinary nature of agricultural economists' training ensures that they are able to converse with specialists in these fields. This also makes agricultural economists indispensable in certain organisations and state departments.
The agricultural sector is presently experiencing changes that present new opportunities for agricultural economists. Not only are there more opportunities, but there is also a greater respect and demand for agricultural economists and for the knowledge they have. The following are among the apparent changes that have taken place:
- Deregulation in the marketing of agricultural products
- The internationalisation of the agricultural industry, and the importance of competition
- Land reform and the growing number of new and emerging farmers
- New markets that have developed within South Africa, southern Africa and internationally
- New technologic for production, processing and marketing technology
- A changing environment for agricultural workers
The need for the expertise of agricultural economists within this changing dynamic environment will now be illustrated.
Deregulation in the marketing of agricultural products
In the past, the state controlled prices, and marketing channels and processes via the Marketing Act Marketing channels have been liberalised recently and are now left to the initiative and entrepreneurship of the farmers, producer organisations and co-operatives. As a result there is a much greater demand for agricultural economists to take part in the marketing decisions of the farmers' products. Decisions must be made as to which products to produce, where to produce them, when to produce them, how and in what form to produce them, through whom to market them and at which price they should be marketed.
The importance of the agricultural economist's expertise is not only becoming apparent to farmers, but numerous businesses that process agricultural products and do their own marketing for their products have also discovered the value of agricultural economists in managing the purchase of agricultural products, and promoting the marketing of their own processed products. The abolition of marketing boards has led to an unpredictability in the supply and prices of agricultural products, and this means that there are various new aspects that have to be considered when purchasing or planning to purchase unprocessed products.
The deregulation has also made South Africa part of the international agricultural world with its complex trading systems. One exciting development is the futures market, where commodity futures are traded. These contracts can be bought and sold in a manner similar to trading shares on the Stock Exchange. Farmers, processors, importers and exporters can hedge themselves against any unfavourable changes in prices and exchange rates. Other forms of market development have given rise to similar opportunities and challenges. An increasing number of agricultural economists are becoming involved in these kinds of activities in South Africa. In this regard we are quickly catching up with the advanced East, Australia, North America and Western Europe.
Farmers, agri-businesses and financiers cannot achieve success without keeping up with international agricultural trends. It is also essential to stay informed of the developing markets, to identify their potential and make use of them. For example, the Indian market is growing quickly, and is already as big as those in Western Europe. What opportunities, problems and challenges does this pose for the South African food and fibre industry? Local prices, production and cultivation patterns are going to be determined in the future largely by international trends. The greater freedom in world trade will mean that it is important to stay competitive. Efficiency and productivity will be of utmost importance. The agricultural economist must therefore train people in the most economical use of production factors. Producer organisations, co-operatives, and agri-businesses are depending more and more on their agricultural economists to ensure that they are favourably placed with regards to the changing international trends. Needless to say, this is a vital role.
The South African market is changing rapidly as a result of a number of reasons, for example, urbanisation, changes in employment, incomes, communication. The market is not homogeneous, but comprises a variety of market segments that require different approaches if the producer, processor and marketer want to achieve the best results. Such investigations and the compilations of marketing plans are important tasks, where agricultural economists are once again involved.
The international markets are changing constantly, and only those that can forecast problems, identify opportunities and act accordingly, will come out on top. Agricultural economists are being used increasingly in this role.
The researchers of the world, including those working in South Africa, are constantly opening the doors to new opportunities. There are new crop varieties that are higher yielding, but perhaps taste slightly different. Some are more stable than others. There are new options in processing, new methods, and different end results. Trade methods are constantly changing; electronic trading is becoming more popular.
No farming operation, processor or trader can simply ignore such developments, nor can they rush in and take chances in implementing new, unproved formulas. The applicability of breakthroughs must be tested under the relevant circumstances, and sometimes the new technology needs adaptation. One has to consider the costs, the financing and the effects on income. The determination of the expected economic returns of new technology, and its feasibility within the specific operation, is an interesting and challenging task for agricultural economists.
Large number of emerging farmers
A major challenge confronting the agricultural community is how to develop policies and strategies that will help previously disadvantaged farmers to benefit from the more liberalised, deregulated market for agricultural products. Much of the research effort on the part of agricultural economists working in South African universities is focused on identifying the needs of this new, emerging group of farmers and developing support programmes for credit, production inputs and marketing processes for these farmers.One of the traditional tasks of the agricultural economist is to provide farmers with economic and financial advice. Furthermore, agricultural economists guide the farmer as to which would be the most advantageous combination of the different production factors in his operation, so as to be able to produce at the lowest possible costs. This will and should always be one of the most important tasks of agricultural economists. They must also be aware of which product might hold the best advantages, and where and how it should be marketed. The expertise of the agricultural economist will become more and more important to assist emerging farmers to become successful, given the large number of new entrants into the commercial agricultural sector as a result of the land reform processes. They will play an important role in feasibility studies of projects and programmes of developing farmers, and this area poses great challenges to the agricultural economist.
Changing workers' environment
In the farming sector as well as the industries related to farming, the arrangements and conditions between employers and workers are changing rapidly. Production and management methods will have to be adjusted accordingly, within this new framework. Once again the agricultural economist plays an important role under these circumstances, as his/her advice and management knowledge can assist both parties throughout this transition.
Increasing importance of environmental aspects in economic planning
The agricultural economist is traditionally concerned with the economic application of our scarce resources, such as land and water. With the stronger emphasis on sustainable development and the determination of development projects' effects on the environment, we are relying more on the expertise of the agricultural economist. The study field of agricultural economics has developed to include relevant courses on resource and environmental economics, given the need for specialised knowledge about the impact of economic aspects on the environment.