FARMING AS A BUSINESS MODEL 2

We talked about the value chain and the angle to which each of the concerned viewed the agric business. Let’s see the point of correlation between the farmer, market audience and the value chain.

The farmer’s expectation

Every farmer wants to get good seeds that are disease free and ensure they grow at the shortest possible time. He wants to ensure the yield are up to his expectation and supplies his clients as at when due and in the right demanded quantity. A shortfall from any of these keeps the farmer worried about the survivability of his farming venture.

However a lot of these expectations have been impaired by lack of finance and adequate modernization of the process. It takes the modernization of agricultural process to make it completely commercial venture. The old practice of crude tools will in no way result to profitability no matter the input of the farmer. Just like other business models, it takes volume sales and turn over to achieve profitability.

The Investors concern

The investor is worried about every sector of the value chain, as this helps to induce profitability and reduces down time. From the quality of seeds to the harvesting and production of the produced as finished goods.

In case of food crops, the quality of seeds/ vegetation used is of great concern, as this helps to give the agro industry a direction to where its going. A low quality seed is sure of not boosting the profitability of the industry. Take for instance the pineapple value chain. The fruit comes in various species and they differ in the juice production. There is the species that is small, not juicy but rather very sweet. The other comes in huge sizes, with thick fibre, juicy but not sweet. The output in terms of fruit juice is a function of what the agro allied industry is aiming at as its finished product.

Same goes for oranges, mangoes and bananas.

As lucrative as farming venture is, it requires an understanding of the present day environment and the antecedent in the sector. In an economy like Nigeria, it is about understanding the economics of scale; the demand for the produce, its availability and sustenance.

One of the challenges faced by the Nigerian agricultural sector is the processing and preservation of farm produce. Right from the farm to the point of sale, this is where the industrialization of the sector would be appreciated.

Until the right enabling environment is put in place, investors may still be faced with the high cost of doing farming business.

It is important to know the sector of agriculture you desire to venture into, food crops or cash crop. Having a clear understanding helps put the business model into perspective. In subsequent post we would be looking at a general agricultural business plan that is bankable.

FARMING AS A BUSINESS MODEL 1

Every business first thrives on proper planning. The same it is for farming as a business model. It should be looked beyond just providing food for the populace, but as a venture that needs continuity and sustainability. 

One cannot rule out the fact that an enabling environment needs to be created for business to thrive, howbeit; there are chances of agricultural produce thriving irrespective of unforeseen policies. Take for instance the propagation of cocoa by farmers in Ondo state, cultivation of watermelon by women in Abeokuta, to mention but a few. These businesses however little in capacity are thriving.

One of the major challenges faced is the articulation of these ventures into a bankable business model that requires adequate financing, proper logistic processes and marketability. Every agric business is bankable and marketable; the major challenge is the proper understanding by the financial institution how this venture operates.

In the agric business model, acceptability may not be much of a problem, as everyone must eat one way or the other. Sustainability has always been the challenge. This is also caused by inconsistency in policies handed over as well as its continuity. Farmers all over the nation have learnt to adopt and adapt to policies of the present day, the result of change in governance has often resulted to changes in practice models by these farmers and this has affected their productivity.

Risk Variation

Just like any other business model, it has also got its risk, ranging from preservation to processing. This may have been attributed to poor infrastructure, such as good roads, storage facilities, and lack of ingenuity. It would amaze you to know the amount of water melon, plantain, bananas, oranges that lie wasted in the dumps of Ketu and Mile 12 markets in Lagos.

Again one would want to say and encourage the springing up of agro-allied industries, which could embrace the processing of these foods. Such attempts are been greeted with high cost of taxes and power generation rate. Seen the reality of these agro industrial challenges could discourage any would be industrial investor. In this light, the growth of that sector becomes inimical, there by affecting large scale production by the farmer.

Risk/Profit analysis

Farmers would want to reduce their risks if shown the way, as no one would like to see his produce getting spoilt. The quickest way this could be achieved is by giving incentives to industries that have these produce as part of their value chain.

From the farmers point of view, the encouragement they need is the assurance that their produce will be bought. A case scenario where the agro allied industry invests directly in the farmers produce will help to keep both the farmer and the firm in business. There are some firms that have adopted this farmer/ business model approach and have favoured them considerably.

From the view of the agric industrialist, it’s all about the value chain, from the farmers view, its all about sales and income. The marriage of these two factors will help to put both parties on the profitability scale. Only then can continuity be possible and sustainability embraced.