Potato profit margins hindered by municipal fresh produce markets

The insidious decay of municipal fresh produce markets over the past few decades has had far-reaching consequences for the fresh produce industry. As the largest traded commodity, potatoes have been especially hard hit. Willie Jacobs, CEO of Potatoes SA, spoke to Lindi Botha about the impact and the way forward.

-  Lindi Botha

How are local potato farmers being affected by the decline of municipal fresh produce markets?

The primary impact is twofold. Firstly, the markets have not kept up with the growth in fresh produce volumes delivered to them over the past three decades. This means they don’t have the capacity to handle the current volumes, with significantly greater negative impact when volumes start peaking in a season.

Floor space, cooling facilities, loading and parking bays, and transaction systems aren't adequate. The severe lack of maintenance in certain cases means the floors have potholes, so forklifts owned and operated by market agents – because the markets haven't provided these – get damaged.

Frequent power outages mean lighting is often absent, cooling facilities aren’t working, and transaction systems are offline. If the latter aren’t working, everything comes to a standstill and produce can't be sold.

Secondly, since the markets don’t have the throughput capacity for the volumes, the produce sits for extended periods on the floor, where quality deteriorates. Lower quality means lower prices for farmers, and ultimately less income for the market since they get paid a percentage of the sale price. In some cases, the quality deteriorates to the point where produce is sent back to farmers, who then suffer major financial losses.

The national markets currently handle on average 1,2 million 10kg bags of potatoes per week. But anything above 800 000 bags in stock at any given point creates bottlenecks and means that stock is carried over for more than two days, decreasing the quality. To prevent financial losses as a result of lowered quality, the markets nationally must be able to handle more than 400 000 10kg bags per day.