South African Grain Farmers in Dire Straits: Scenarios for Sustainable Farming

Abstract

Traditionally, the South African farmer has always been an entrepreneur, running his/her farming activities as a business to support lifestyle, provide a future for the children (as successors to the family farm or by providing education for a career) and to provide for comfortable retirement one day. However, a number of climatic- and economic environmental issues has resulted in severe constraints to farmers as entrepreneurs, creating a situation where farming are on the brink of collapse and maize farmers are struggling to survive. The production years 2005/6 and 2006/7 are critical. This paper focuses specifically on the summer grain production areas in South Africa where, in addition to the main crop maize, they also plant crops such as sunflower, peanuts, dry beans, sorghum and grazing for livestock). The objective of this paper is to report on the viability of possible scenarios that could assist the farming entrepreneur to sustain his/her farming activities beyond the following two years. A number of specific constraints impact on the grain farmer, namely the overproduction of almost all grain types, the free market system of pricing grain internationally, the Rand/Dollar exchange rate, the capital investment trap and the current government assistance policy, to name but a few. All of these constraints have resulted in a situation where it is no longer viable for farmers to produce the main crop (in excess of 80% of farming activities) namely maize. This situation calls for drastic intervention in entrepreneurial decision-making, and farmers must consider other viable options to service debt and to maintain a positive cash-flow. The analyses show that, ultimately (and most unfortunately), no favourable solution is at hand. From the possible scenarios evaluated in the paper, it is evident that maize farmers should discontinue production of maize on a large scale for the immediate future until the market environment improves. The farming community is faced with a situation of minimising losses and not with any real positive solution pertaining to the scenarios evaluated. The final conclusion is that current economic situations for maize production are unfavourable and the resulting recommendation is that farmers should not plant maize in the 2005/6 production year, that they should ride out the market and then revisit the production decision for the production year 2006/7.