Changing gears from price taker to price maker
In 1960 there were approximately 300 000 farmers in South Africa. Prof. Eckart Kassier, former head of the Department of Agricultural Economics at the University of Stellenbosch, predicted in 1994 there would only be 30 000 farmers on the land by 2014. Back then, many farmers thought he had lost it, but today that is all we are. The prediction is that in the next decade, the number of farmers will dwindle to 7 000. Decline is inevitable unless we endeavour to make plans to survive in a changing agricultural climate.
The reasons for this decline are numerous:
- We sell our products too cheaply;
- We are price takers and not price makers;
- We lose control of our product when it leaves the farm gate;
- Our inputs are too costly;
- Our products have no brand identity or reputation;
- We do not have scale of economy;
- An individual farmer does not have the benefit of collective negotiation; and
- He is also not able to fulfil his social responsibility adequately.
Today's farmers accept the clumsy and expensive manner in which they have to market their products. They moan and groan, but don't attempt to trump the agent-to-agent route.
What are you going to do to be relevant in 10 years' time – one of the 7 000 farmers making a difference in South Africa?
Konsortium-Merino has accepted the challenge to remain standing. We went grazing beyond the fence. After innovative planning we have put structures in place to survive the new agricultural environment. Today we aren't merely traversing agricultural roads as we know them, but actively seeking and paving new routes in order to reach our destination. Life is like riding a bicycle. To keep you balance - you must keep moving.
Konsortium-Merino is a farmer controlled smallstock trademark in South Africa. Besides supplying superior genetics, wool and meat under the Konsortium trademark, our group also focuses on shortening the value chain for its farmers and adding value to our products along the way.
FORM A GROUP
Today's challenge is to remain relevant in South African agriculture. A farmer cannot achieve this alone on his farm, but together we have muscle and can produce critical amounts of quality, create markets and make a real difference.
Since 2007 we have been encouraging farmers to become members of Konsortium-Merino. We now have 138 farmers in our group with more than 200 000 producing ewes.
We have our own sheep and wool advisors adding value to our members’ businesses. They establish and protect the Konsortium type on our members’ farms to benefit all who join the Konsortium family. Mentors, farmers themselves, assist our members with advice and help to improve their flocks. They aid farmers with ewe selection, choice of rams and give guidance regarding flock and veld management.
BRAND YOUR PRODUCT
Marketing a product without a brand is like introducing someone who has no face. Konsortium-Merino has established a brand which guarantees quality and is in demand. Konsortium wool for example is identified under our brand on the auctions. Vink Venter of Segard Masurel South Africa (SMZA) says that when a Konsortium clip comes up for sale, “there is a buzz in the auction room”, because it is evident the clips have better quality, length and clean yield.
We export Konsortium-Merino wool to Europe direct. Our wool story is green and has been met with approval, especially in Europe, where consumers are very aware of what they buy, wear and consume. They are also willing to pay more for a trademark that has been produced in harmony with nature and applies a Code of Best Practices. Our wool growers practice ethical animal husbandry and sustainable farming methods. Our client advisors' main function is to manage the Konsortium-Merino brand. With the use of special ear tags, they identify brand ewes, approved ewes and Konsortium slaughter stock and market them as such.
USE MOTHER NATURE
Mother Nature classes our sheep, ensuring an adapted sheep which performs well throughout the country. If she does her job well, we pay the price as many rams fall by the wayside – but quality is guaranteed. Only 12% of ram lambs born make it to the sale.Our buyers are able to appreciate veld reared animals. What you see is what you get.
Why do stud farmers need to feed a ton of maize to a bull before a farmer can appreciate the value and be prepared to pay R300 000 for it? Feed only serves to dress up the animal and has no effect on its breeding value.
GROW YOUR BUSINESS
In 2013 Konsortium-Merino sold a massive 891 rams under our brand on six auctions at an average price of R5 363. This is more than 23% of Merino SA's ram sales.
Who would have thought that four breeders, who started off by selling 78 rams at their first auction in 2001, would eventually make huge inroads into the market? Today our group sells the most rams on official ram sales in South Africa and have already bettered the SA record for turnover at a Merino ram sale eight times. Last season we also improved our SA record for the most rams sold on one auction, to 333.
CUT COSTS & SAVE MONEY
Konsortium-Merino negotiated an alternative wool marketing route, which gives our farmers a choice, guarantees them a premium and cuts costs. Konsortium farmers now have the choice of delivering their wool directly to SMZA to be processed in their mill in Uitenhage, or putting their wool up for auction. Due to the lower cost structures, producers who marketed through SMZA this past season, saved themselves about R3 675 000 in marketing fees. The fact that SMZA does not impose a bale handling fee has meant a further saving of R985 000. This is a saving of more than R4,6 million in wool marketing costs – simply because the Konsortium group ventured beyond the norm.
PROUDLY SOUTH AFRICAN
We take great pride in our own Merino wool jacket which is 100% proudly South African from sheep to shop. Konsortium-Merino wool is produced in South Africa and locally washed, combed, spun, woven and tailored into cool, lightweight jackets. Not only are jobs being created, but value added to South Africa's agricultural products.
The Cheetah rugby team are the ambassadors for the jacket. The jacket has been styled to suit every generation and every occasion. It is available in three colours: Karoo, Midnight and Footpath.
As far as our group knows, this is the only pure men's wool jacket that is proudly South African in every sense. Because of cheaper foreign labour, most of the woollen clothing sold in South Africa are spun, woven and even manufactured abroad.
INVEST IN AGRICULTURE
After much brainstorming the directors of Konsortium-Merino established a holding company which, in terms of the Companies Act of 2008, issued shares to the public last year. Many more farmers and other investors can now become part of the Konsortium-Merino success story via Konsortium Holdings Pty Ltd. It gives the public an opportunity to invest in land and stock without having to deal with the everyday management of such a business.
Our quest to find an anchor investor is on-going. The capital generated will be used by Konsortium Holdings to buy, or hire, agricultural land and stock to extend Konsortium's farming enterprises. The goal is to achieve 20% market share of the Merino industry in South Africa and to then be able to produce enough wool, meat and skins to supply the local and international demand for Konsortium-Merino products.
Economists agree that an investment in agriculture is an excellent choice. Food security is a huge concern and farmers must seize this opportunity.
TOGETHER WE OFFER MORE
The Konsortium's passion and enthusiasm for our Merinos is contagious. This, together with a well thought out business plan, dedication and integrity is a winning combination. Our group has vision. Our focus on the improvement of the Konsortium-Merino type and the promotion of our brand ensures growth and prosperity for the whole Konsortium-Merino family.
Konsortium-Merino does not want to be a small fish in a large pond, nor does it want to be a large fish in a small pond. Konsortium-Merino wants to be the first fish to walk on land.
In order for today's famer to still be making a contribution towards the South African economy in ten years' time, we have to think out of the box, going where there is no path and leaving a trail. I encourage you stock farmers to think big. Dare to venture beyond the fence. Be open to change and convert the problems experienced in the stock industry into opportunities. Set goals and make plans to achieve those goals step by step. Budget for a profit and work hard as there are no shortcuts to success.
“Know your past, Own your present. Choose your future.” Anon