Table of Contents

1. Overview

Markets selling agricultural products have been with humankind for many thousands of years. They have adapted and changed over time but the fundamental reason for their existence has never changed i.e. where supply and demand meet to establish a value for a product so that a sale can be made.

There are different types of agricultural markets, such as farmers’ markets where the farmer is on hand to sell his products, or wholesale markets where a wholesaler has purchased the products from the farmers and sells those products for a profit, or a commission markets where market agents sells the products on behalf of the farmers.

In South Africa we have the added option of Informal Markets which are a feature of our national landscape as they can be found along main roads, outside bus stations, taxi ranks, alongside existing fresh produce markets and in rural towns. Informal Markets in various forms can also be found in many African countries. In this country they are essentially wholesale markets, as the vendors have purchased their products from farmers or the bigger markets to resell again to the public and tourists. They are classified as Informal Markets because they are not subject to the same formal structures and laws that govern the fresh produce markets.

Markets traditionally sold all farm products but as times changed so did the selling and distribution requirements of agricultural products. Specialisation has become the key and in this country we now have fresh produce markets, flower markets and livestock markets (auctions).

South Africa’s fresh produce markets are the only system of fresh produce commission markets in the world (see Jansen, 2017 – heading 6).

 

2. Local business environment

Registered Market Agents sell produce on behalf of farmers. They are governed by Act 12 of 1992 (amended 2003) which prescribes, amongst other requirements, how they will handle the farmer’s money. These agents register with the Agricultural Produce Agents Council (APAC) and after complying with certain requirements of Act 12 can open for business.

The Act requires a Market Agency to open a Trust Account on behalf of its farmers thereby ensuring that their money is controlled and regulated. Market Agents must submit a Trust Account Reconciliation to APAC every month. Market Agents must by law pay their farmers within 5 working days after completing the sale of a consignment.

Act 12 also provides for a Market Agents’ Fidelity Fund to which only they contribute annually and which guarantees farmers’ money under specified circumstances. Find the notes on the Fidelity Fund and when a farmer can claim against it under heading 4.

The majority of the Fresh Produce Commission Markets in South Africa are linked to the Freshmark System which is an IT network providing a comprehensive range of daily, weekly and monthly information on sales as well as national statistics (see www.freshmarksystems.co.za).

By reacting to the laws of supply and demand on a daily basis, fresh produce commission markets remain the purest form of price establishment available to farmers and buyers.

Find the list of registered fresh produce market agencies at www.apacweb.org.za/registered-fresh-produce-agents

 

3. Farmer points of interest

Tips to Farmers – from Your Market Agent

The following advice to farmers is based on a ‘picture’ that has evolved over many years on how to interact with your market agent and is based on an informal survey undertaken amongst market agents.

  • Be honest and open about your products and marketing plans.
  • Be loyal to your market agent and don’t jump from agent to agent, allegedly seeking better prices. Farmers who do this on a regular basis develop a poor reputation amongst market agents and buyers, which reduces their chances for better service and prices.
  • Give the market agent a fair chance over a reasonable period of time to produce results.
  • Try to visit the market as frequently as possible to understand the market agent better who is handling your product/s and to learn about the modus operandi of the market.
  • A farmer should evaluate a market agent on performance and not hearsay or perceptions.
  • Ensure a consistent supply to the market – through thick and thin. This builds confidence and trust from the market agent as well as the buyers. This will be reflected in your average price at the end of the day – which is more important than a few high prices you might receive along the way.
  • Keep in constant touch with the market agent in terms of products, varieties, volumes, planned deliveries and other relevant information.
  • Listen to, and accept constructive criticism on your products from the market agent.
  • Listen to what the market agent tells you about the state of the market and supply accordingly.
  • Keep the market agent advised of your medium to long-term production plans so that the latter can advise you on the marketing prospects for that crop and also start preparing the groundwork for sales.
  • Avoid attempts at price manipulation by playing agents off against each other. They see right through it and it is an insult to their intelligence.
  • Share product information with the market agent – storage requirements, holding temperatures, unique selling points, delivery arrangements, seasonal projections and marketing objectives.
  • Finally, look upon the market agent as your own marketing and sales manager on that market.

A Good Market Agent – from the Farmer’s Perspective

The relationship between farmer and market agent is a delicate one at the best of times. It is something that has to be constantly and carefully nurtured. The onus for making the relationship work rests equally on both parties, and the foundation of the relationship is trust. Many farmers and market agents can boast of successful relationships and they will tell you that mutual trust has been the cement of that relationship. In the eyes of a farmer, a market agent should:

  • Be someone who has the ability to sell.
  • Treat the farmer’s products with respect.
  • Be able to evaluate a product in money terms – in other words, be able to put a fair value on the product given quality and market conditions at the time.
  • Be able to assess the product in terms of appearance, colour, packing and packaging, grade, variety and market conditions.
  • Be able to assess, or “read”, the market in terms of supply and demand and all the other factors that impact on the final price of the product.
  • Have the integrity to deal with both farmer and buyer in an open, friendly, honest and businesslike manner.
  • Support his/her farmer through innovative sales techniques, attractive displays, visual samples, promotion and other sales generating techniques as well as good stock control.
  • Be up to date on market conditions in general and more specifically on product availability and demand.
  • Ensure that his/her farmer is kept informed on market prices and conditions on a regular basis – even daily if necessary.
  • Give his/her farmer an honest assessment of his/her products and not be afraid to offer constructive criticism.
  • Actively canvass and visit buyers to build a solid client base and promote products on offer.
  • Have the backing of a reputable market agency that can provide all the support services which add to the final package. These include prompt payments backed by efficient and accurate accounting procedures.
  • Be the type of person who can remain positive, even through difficult times; has the will to sell and the desire to improve himself/herself all the time.
  • Because of the unique position of trust that a market agent occupies between farmer and buyer, his/her business dealings should be impeccable at all times.
  • Finally, a market agent will never become “truly perfect” if he or she is not prepared to get up very early six mornings a week!
Source: Michael Cordes, Institute of Market Agents of South Africa (IMASA) and PAMBILE Africa Training (Pty) Ltd