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BUSINESS MAVERICK 168

Let’s get hitched: A new trading post aims to set up agricultural buyers and sellers

CAPE TOWN, SOUTH AFRICA - MAY 14: A tractor ploughs a field on a farm in the Durbanville Hills area on May 14, 2020 Cape Town, South Africa. South Africa started a phased easing of its strict lockdown measures on May 1, in a continued attempt to contain the increase of coronavirus cases. The export of all agricultural, agro-processed, fishing and forestry products are allowed during lockdown level 4. (Photo by Gallo Images/Nardus Engelbrecht)

When it comes to the buying and selling of grain, South Africa is fortunate to have a First World trading system in the SA Futures Exchange (Safex), which provides a platform for transparent price discovery and price risk management.

First published in the Daily Maverick 168 weekly newspaper.

As with all exchanges, it cannot cover every agricultural product, and it does not accommodate price variances as prices are standardised on one area – Randfontein – and applied across the board.

This means farmers offering different prices from different areas are not visible on the Safex system.

Safex also only trades in South Africa’s biggest commodities, such as wheat, maize, sunflower seeds and soya beans, leaving sellers of smaller commodities out in the cold.

Now Skudu, an agri-tech company based in Paarl, has stepped into the gap and launched Skudu Match, a free agricultural app that directly matches farmers and buyers of agricultural produce.

“South Africa produces more than 18 million metric tonnes of grain annually. The chain of grain sales can be costly for both farmers and buyers – anything between 0.15% and 15%,” says Skudu CEO Cobus van der Merwe.

These costs, he adds, can be attributed to unnecessarily long chains of buying and selling or expensive sourcing structures. Skudu Match will cut down these costs.

Van der Merwe was a grain trader before  he moved into the agri-tech sector.

“We identified the problem that farmers are not in contact with all potential buyers interested in their production when they want to sell.

“For the buyers, it is challenging to find farmers that are willing sellers at the time they want to buy.”

Skudu Match solves this problem in four steps. “It’s a bit like a dating app,” he says.

How it works:

Put yourself “out there” and scout the market for a match;

Compare character traits;

Chat online and negotiate the five Ps (product, position and period of availability, price, payment terms) and two Qs (quality and quantity) in the Skudu negotiating room; and

Go on your “first date”. In Skudu Match terms, this means you get introduced to your counter-party and you sign the deal.

The system, says Van der Merwe, is designed to accommodate any products, of any quantity. It will start with grains and will include lucerne and hay bales as well as straw. Vegetables and fruit will come soon after this, but in this area, Van der Merwe notes, there are other competitors.

“Our intention is not to compete with Safex or duplicate any parts of the system that are working effectively,” he says.

“We want to provide the ability to establish a price for products in other corners of the country where there is little price discovery and low liquidity.”

The app is free, but Van der Merwe is hoping to generate leads from his clients for other pillars of the business. These include Skudu Market, which is for bulk farming inputs (a huge virtual warehouse from which farmers can source bulk inputs) and Exact, through which farmers can receive fertiliser guidelines from a soil or leaf sample, generated by the firm’s agronomic algorithm. This guideline is crop-, stage- and area-specific.

The algorithm goes through more than 780 billion calculations in less than a second. It can be used to plan fertiliser purchases or to discuss problems with a local agronomist.

The agri sector is one of South Africa’s few growth sectors. There are 30,000 farmers in the country but new entrants are emerging and, with them, younger and more tech-savvy farmers.

“For a long time this wasn’t the case – 10 years ago you did deals over a cup of coffee in the farmer’s kitchen. Now it’s different,” Van der Merwe says. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.

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