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NFA continues investor hunt

Absalom Iimbondi in action for Tigers. File photo

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      Using Data To Identify Agricultural Gaps

      by

      .

      Michael Thikuso

      A FARMER MUST understand what the consumer wants to eat, where his produce is needed, and when.

      Without this knowledge, the farmer would harvest produce no one wants to buy or harvest during a period of market abundance, ensuring losses and low profits.

      Reading and comprehending data is one method through which the farmer can gain this insight.

      The purpose of this article is to assist agripreneurs in developing the mental framework required for reading and interpreting economic market data – data that can be used to better understand Namibia's agricultural industry by identifying emerging risks, consumer preferences, and industry shortfalls.

      Commercial farming has evolved from being solely informed by cultural methods to incorporating agricultural science, data science, and economics.

      Data allows the agripreneur to identify market gaps to exploit. Knowledge of economics allows the farmer to study market characteristics, and agriscience aids in yield increase.

      Despite this evolution, African farmers continue to plan their agricultural production using only traditional farming practices passed down from generation to generation.

      The problem is that the African agricultural system, as well as the technical indigenous knowledge that supports it are best suited to subsistence farming. This is due to the model's disregard for important market factors, such as demand and supply.

      Applying this model to a commercial setting while ignoring these critical factors is a recipe for financial disaster. This is not to say indigenous agricultural systems did not incorporate modern-day agricultural practices.

      Earlier African farmers, for example, used careful observation and data to refine current indigenous agricultural know-how over time. This process was aided by the collection of data such as plant-growth cycles, rainfall patterns, soil types, and storage methods.

      WHAT THE DATA TELLS US

      In Namibia, the Namibian Agronomic Board (NAB) and the Namibia Statistics Agency (NSA) publish market information and data on a variety of agricultural commodities.

      Price trends, output, and demand are all included. Current market data suggests large pockets of opportunity in Namibia's agribusiness sector.

      This is according to the NAB, which has previously reported that Namibia consistently faces shortages of a variety of vegetables and grains, such as potatoes and maize.

      The NSA confirms the NAB's findings about potential market gaps in the domestic agricultural industry in their monthly trade statistics.

      This signal, however, should not always be taken at face value, because it can be misleading.



      MARKET DATA READING



      Every farmer needs to understand the relationship between supply and demand forces in the market they operate in. This is because it eventually influences the pricing of commodities in that industry. Gaining such an understanding also provides insight into the industry's capacity.

      As a result, knowing whether or not demand is sustainable can save a farmer from incurring significant losses as a consequence of mistaking a temporary price increase for increased market demand.

      Thus, making this distinction prevents the farmer from making the costly error of increasing capacity when there is no demand.

      Similarly, sustained shortages caused by increased demand may signal to a farmer to upscale their operations to satisfy the excess demand.

      In general, when the supply of a commodity, such as onions, is low while demand is high, prices rise.

      Using this logic, selling onions when there is a scarcity in the domestic onion market allows the farmer to capture higher prices.

      In Namibia, this usually occurs between January and April, just before the start of the local marketing season in May. Most small-scale farmers, on the other hand, flock to the market with their harvest at the start of the marketing season, when supply is sufficient to drive down prices.

      DATA WITH INSIGHT

      Continuing from the previous example, onions are typically a summer crop, and many farmers plant them during the warmer months.

      As a result, the supply of onions in Namibia is reduced during the growing season, which runs from January to April, when prices are higher.

      During the domestic marketing season, which begins in May, there is generally an oversupply, which lowers the price per kilogramme.

      During January and April, when domestic supply is low and onion prices are high, South African farmers frequently take advantage of this market gap.

      This either corresponds to their natural growing season or is informed by market data analysis, which is then used to time when new seeds are sown to mature when there is a shortage in the Namibian market.

      However, because of their limited ability to interpret market data, Namibian farmers do not take advantage of this opportunity. Indeed, according to the NAB's Market Intelligence issue on onions in 2021, while local onion production has increased over the years a lack of adequate storage has been a limiting factor.

      Without going on and on, incorporating data into decisions about what to produce, when to sow, and where to sell can mean the difference between a farmer's success or ruin.

      Furthermore, by studying the operating environment smallholder farmers can develop sound strategies based on industry information such as average costs, competition intensity, and entry barriers.

      Regardless of what is said in this article, applying the knowledge extracted from any data requires good business acumen. Assume, for example, that a specific region has a strong growing trend towards healthy eating.

      This, combined with knowledge of a specific industry that is primarily supplied with genetically modified organism inputs, may indicate the existence of a market for naturally grown food.



      * Michael Thikusho holds a bachelor's degree in economics and is currently working as a junior analyst at Monasa Advisory & Associates.


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