FMD | Understanding requested for cash-strapped livestock farmers

The rampant spread and consequences of foot-and-mouth disease (FMD) have many of South Africa’s livestock farmers now pushed to the brink in terms of farm cash flows. Retailers of essential production inputs are being asked to make concessions in these immensely challenging times.

By Lloyd Phillips, senior journalist at African Farming and Landbouweekblad  

The team of beef and dairy farming consultants with Intelact South Africa is seeing firsthand the widespread material and financial devastation that foot-and-mouth disease (FMD) is wreaking across the country’s numerous cattle farming businesses at all scales of production.

African Farming has frequently reported on the numerous negative consequences of this disease. These include many farmers being prohibited from selling animals or milk; farmers often receiving unfavourable prices for these products in instances when they can be sold; milk from infected animals having to be discarded; animals dying or having to be euthanised; the virus causing immediate and longer-term fertility and productivity problems in herds; and farmers having to spend far more than originally budgeted on treating infected animals and on enhanced biosecurity measures to hopefully keep the virus at bay.

It has been suggested that South Africa’s farming input retailers and livestock farmers unite to request that the manufacturers of these inputs, especially those overseas, reduce their own prices for the South African market. Photo for illustrative purposes: Vida Booysen

Financial Impact on livestock

All these aspects are having immense impacts on livestock owners’ cash flows and finances.

Considering this, Intelact South Africa has publicly released a list of key messages to all suppliers of production inputs to livestock farmers and to these farmers themselves. In the main, it asks for mutual understanding and cooperation from both sides.

The FMD crisis is disrupting the entire supply chain. Farmers’ ability to operate, move animals and generate income is severely restricted;

Cash flow across farms has collapsed. Many farmers currently cannot meet regular payment terms despite their intention to do so;

Non-payment is a consequence of the crisis, not of unwillingness by farmers to pay. Disease control, production losses and market shutdowns are driving this situation;

Suppliers are exposed to serious financial risk. Feed companies, veterinarians, input suppliers and providers of other services may face unpaid accounts and reduced demand;

Flexibility will help protect long-term business relationships. Temporary payment arrangements and understanding will help ensure survival on both sides;

Biosecurity compliance remains critical. The continued supply of inputs and outputs must be balanced with strict biosecurity to avoid further spread of disease;

The crisis threatens future supply volumes. If farms fail now, long-term demand for inputs will permanently decline;

Industry-wide advocacy is essential. Unified pressure on the government is needed to secure effective vaccines, funding and regulatory relief, and to include the private sector. Declaring a state of emergency makes the situation worse by preventing the sale of products, resulting in farm closures;

Delays in resolving FMD increase losses for everyone. The longer the outbreak continues, the deeper the financial damage across the value chain;

A rapid resolution benefits suppliers directly. Containment and recovery will restore production, cash flow and normal trade relationships; and

Forced cattle and farm sales will not rescue insolvent farmers. Distressed sales in a restricted market depress prices, destroy asset values and leave farmers unable to settle outstanding supplier accounts.

<caption> Foot-and-mouth disease is causing farmers to lose money in various ways, including the cost of treating or euthanising sick animals and lost productivity. Photo: Intelact — Foot-and-mouth disease is causing farmers to lose money in various ways, including the cost of treating or euthanising sick animals and lost productivity. Photo: Intelact

‘We’re All in Survival Mode’

Retailers of agricultural inputs who spoke to African Farming on condition of anonymity all said that they are already seeing increasing numbers of livestock farmers struggling to pay their accounts. The retailers anticipate that this situation is likely to get much worse before it hopefully eventually improves again.

The finance director at a retailer of veterinary products for livestock farmers confirmed that farmers who fall into arrears or stop paying altogether pose a financial risk to his company.

“We urge our farming clients who are experiencing financial difficulties to please rather approach us to discuss the situation rather than stopping payments and going quiet. Yes, we need to balance our financial risk too, but discussions can potentially achieve workable agreements between both parties.”

The manager of an agricultural inputs retail outlet said he is keenly aware of the immense impacts that FMD is having on livestock farms, and that he sympathises with the farmers.

“We and many other service providers to the livestock farmers are also at great financial risk in this situation. From my company’s side, we’re trying to help farmers by reducing the already tight margins on our products even further. We are now also walking a fine line financially. We’re all in survival mode.

“What I am concerned about is that many products we all sell to livestock farmers are imported. I suspect that these international companies are unaware of how much South Africa’s livestock farmers and we input retailers are struggling. In my opinion, I feel that we retailers and farmers should unite to bring this reality to the attention of the international companies, and request that they too compromise by lowering their prices for their products.”

The manager also asked that struggling farmers approach their input suppliers to discuss potential mutually acceptable payment terms rather than unilaterally stopping payments of accounts outright.