**3. Value chain research findings**

The findings of this research are concluded from data collected through interviews with some of the largest agricultural VCPs in South Africa, trying to assess if there are blockages inhibiting CA produce from penetrating the market on a broader scale, and if there is potential scalability of CA produce through these value chains. The following narrative details the results of our interviews.

#### **3.1 Banks**

*Agricultural Economics - Current Issues*

industrialised food systems [55–57].

altogether the greatest human impact on our "planetary boundaries" [2]. Seventy percent of all freshwater globally is used for agriculture [41], while in SA it is estimated to be 63% [45] with no surplus for future development [46]. Agriculture is energyhungry, emitting up to 25% of global CO2 [5, 47–49], while the USA uses 17% of all its energy to get food through the value chains onto its tables [50]: that is 1000–1500% more energy than what the food itself contains in the form of energy [48, 49].

Food-related health issues, like diabetes in industrialised countries [25], keep growing, as the nutritional value of fruits and vegetables dwindle [51–53] and are less present in conventional farmed produce than in organic produce [54]. Nutritional losses continue to occur during processing and storage, typical for

"The roots of this crisis lie in the preceding decades of excess…" says the global financier George Soros and "…for 25 years the West has been consuming more than we have been producing…living beyond our means" Australian Prime Minister in the Sydney Morning Herald July 25th 2009 [58]. Consumption and growth cannot continue ad infinitum on a finite planet [59]. However, our entire economic model is based on growth funded by debt [60, 61], and as unlikely as economic growth can continue indefinitely, growing debt by civil society, businesses, and government, will also find its limits. A bubble is likely to burst once planetary boundaries and

ecosystem services [62, 63], needed to fuel the growth, reach their limits.

viability with increased crop yields and decrease input costs [65, 72, 73].

comparable yields, but are 28–34% better during droughts [7–9].

local farmers in the Sahel can push back the desert.

conventional farms [89, 90].

**2.3 Benefits of agroecology, organic farming and conservation agriculture**

CA practiced with LEI, in combination with cover crops, has the ability to harvest atmospheric nutrients, build soil organic matter, increase soil life, loosen soil, increase water holding capacity and aggregate stability, reduce soil compaction, reduce erosion, recharge the water reservoir, improve water quality, reduce nutrient leaching, and increase pest, disease, drought resilience, and CO2 sequestration [64–71]. A favourable argument in using cover crops as part of CA is the financial

The yield gap between CvF and organic farming (as another sustainable production system with many parallels to CA), especially with proper diversification practices, is 8–9% smaller than originally estimated [74]. Using 1 ton less synthetic nitrogen fertiliser in organic farming saves the equivalent of 5.2–7.6 tons of carbon emissions [75]. Organic fertiliser in Ethiopia have increased yield by 2–3 times, outperforming inorganic fertilisers [76]. In the US, organic farming achieves

Conventional tillage increases soil-based CO2 respiration and has almost 14 times the carbon emission than no-till [77]; additionally exacerbated by warming global temperatures [78, 79], adding up to 50Pg of soil carbon emissions for the Anthropocene, due to tillage [80]. Organic agriculture uses 2–7 times less energy than conventional agriculture [81, 82] and sequesters 5–15% of greenhouse gas emissions [83, 84]. Tropical agro-forestry systems can sequester between 4 and 6 ton/ha of carbon annually [85–87]. Coghlan [88] even argues that trees planted by

A study in Europe has shown that organic farms support more birds, butterflies, beetles, bats and wild flowers than conventional farms, while biodynamic farms have higher levels of soil fertility than organic farms and considerably higher than

While we see clear benefits to more sustainable farming practices, such as CA, penetration in South Africa remains low and highly variable between provinces [11], the question remains, why are we not seeing CA products in retail shelves more regularly, or why, when CA poses less risk, do financial institutions not promote CA?

**72**

The benefits for banks to promote CA to farmers is to end up being less exposed to risk themselves; a capital exposure risk due to drought, potentially exacerbated by climate change. We interviewed four of the largest banks in South Africa, all of whom have been supplying credit to commercial farmers for decades. We asked them whether they had CA tailored products with reduced premiums for farmers because of less perceived risk. Almost all interviewed banks responded in one way or another, saying that they fundamentally did not get involved with productionbased decisions around farm practices, such as CA. Three banks argued that these were decisions farmers needed to make for themselves, and as one bank put it, banks would otherwise be in conflict with lender's liability principles.

All of the four banks argued that good production practices for a farmer automatically showed up in production output benefits and a better balance sheet, which in turn would result in a lower risk profile for a farm and in turn, result in a cheaper credit with better premiums. The argument that this might take years for farmers to achieve was generally responded to that that was the nature of farming. One bank confirmed their view that a production method changeover, specifically to CA, would more likely result in an initial increase in cost and reduction in yield, before any yield increases could be observed and benefits would reflect on the balance sheet for farmers to attain better premiums.

Subsequently none of the banks supplied a product that would give farmer credits with reduced premiums should a farmer convert to CA. Only one of the interviewed banks was aware of research that evidenced that CA was a less risky production method, especially in times of drought. Two of the banks stated they would not plan for a specific product for farmers that would entice them to do CA if research were to evidence CA was actually a less risky production method. In contrast the other two banks indicated that they would think about making CA part of the funding application decision or create a product that would have less 'hurdles' during credit approval process, if research showed CA did reduce risk.

All four banks, however, agreed that if CA mitigated risk, it would in any event ultimately reflect on the financial track record and performance over time and subsequently reduce their risk profile, in turn again reducing the premiums these farmers would have to pay. However, a credit offer always remains a decision based on analysing every farm's risk profile, individually.

#### **3.2 Insurers**

Insurers are first and foremost exposed to hail and then to drought. Insurers' willingness to take on climate risk on behalf of the farmers makes them also susceptible to the farming practices of the farmer, particularly where new machinery and farming principles such as CA have the ability to reduce drought risk and risk of exposure for insurances. The benefits for insurers to promote CA to farmers is not only about reducing risk of capital exposure to drought, but also other climate change risks and the impact of pests and diseases. With a lower risk premiums

insurers charge could be less, which would add economic benefit to the farmers and speed up adoption of CA and a transition to more sustainable farming practices.

We interviewed three of the largest insurers, who together cover around 80–90% of the market in South Africa. None of them had a product tailored to accommodate farmers that farmed with CA practices, or a product that supported the adoption of CA, and none of them indicated that they were thinking of having such a product in future.

When confronted with the questions whether they knew about research that evidenced that CA resulted in more climate resilience and less water stress the insurers argued, similar to banks, that their business model with the way the calculations were done for pricing policy premiums, would automatically benefit those farmers who chose good farming practices that gave consistent yield and had the ability to decrease risk of crop loss at the same time. For example, a farmer that could consistently show stable historic yields, even during draught or 'environmental shocks' would automatically get a cost benefit on the premium of the policy, than a farmer that had bumper yields in good years, but suffered great losses during droughts.

One insurer said, the principle of insurance hinges around good practice, no matter if you use CvF practices or CA practices. Good practice reflects in the historic records, which they would use to price the premium. However, to attain such benefit the track record and historic proof needed to be in place and that would take a few years before reflecting as a better guarantee against crop loss or as a better price on the policy, or both. Farmers who made use of a lot of fertiliser, yet did not look after their soils, this insurer said, might well be likely to show more yield than CA farmers in bumper years, but were also much more likely to suffer greater losses during challenging years. Another insurer said that a well-developed underwriting process would pick up such fluctuation risks and subsequently price more expensively.

When asked whether they as insurer would think about developing products to entice the farmer to take the route of CA and get a better premium without needing to wait many years to benefit, all three interviewed insurers were not thinking of developing such products, nor seemed in favour of it. It would not work with their underwriting principles one insurer argued. One of the few risk mitigating tools they had, this interviewee said, was to work with some form of proof of historical data; you could unfortunately not insure just on a promise that something might happen.

All three of the interviewed insurers knew, or had read something about CA being able to reduce risk by being more climate resilient and building soil structure that would enhance the ability of soil to retain more water. However, to one of the insurers drought was less of a risk than crop loss due to hail and for hail CA had no solution. The interviewee said that they were less exposed to drought, as only after germination would their insurance kick in, and because germination would mitigate a large portion of risk the exposure to drought was less risky than hail. For example, if a farmer has not planted because of low rainfall, or the seed has not emerged because of low rainfall, there will not even be a policy in place to claim against, because the policy is only triggered after the seed has emerged. Because their exposure to drought was so low, getting farmers to farm CA would only have a very small effect on their business in any event, not validating the effort to develop a product targeted at supporting CA.

Another insurer challenged the notion that farmers actually understood the relationship between CA, soil organic matter, the ability to store more soil moisture and what that meant for their crops being more climate resilient. To this insurer, the one farmer he knew only wanted to do CA because of the no-till aspect, which saved fuel and was less capital intensive. This farmer was less thinking about CA benefits on future yields being at less risk due to climate change but was more interested in reducing costs.

**75**

*Value Chain-Induced Constraints Limiting Scale of Conservation Agriculture in South Africa*

The interviewed traders and food processors package maize and maize starch products into end consumables that they sell to supermarkets. Consumers' choice in front of retail shelves influences their brand and supporting a procurement of CA produce could attach a sense of sustainability to their brand and grow an awareness amongst their consumers that their brand is ecologically just and fair to the planet's recourse base. The question is if this is a valid and sufficient argument for the traders to get farmers to supply them more CA farmed produce. We interviewed two large traders and food processors in South Africa that were also owned silos and milling operations of maize. Due to their large product profile, their answers

The term CA generally confused both traders as they were not sure how it related to organic and GMO-free farming practices. In contrast to banks that have dedicated agricultural business units with knowledgeable staff, the traders usually purchased produce from other traders and cooperatives, without needing to understand production methods. After explaining CA in a bit more in detail, the interviewee's answers were more cantered around general sustainability including responses around organic and GMO-free produce. The general topic though was

Because the two interviewed traders were buying from other traders, silo owners, and co-operatives, they had no control over what was in the silos from which they attained their maize, or what portion of the maize in a silo was from CA practices. One trader said they would not keep GMO maize separate, even if they had access to it, as they used about 300,000 tons of maize a month and keeping anything separate in their storage, in such type of bulk environments, would not make sense, specifically for South Africa where 70% of maize is farmed as GMO maize. This trader mostly bought from silo owners, other traders and co-ops, and other than during harvest, in order to fill their own silos, they would not buy

The same trader said that if he had a farmer that farmed using CA, or was GMOfree, it would be just too small for him to go and collect a 100 tons, which is three truck loads, while they are looking for at least, between 3000 and 5000 tons to fill a silo. This trader claimed that such small quantities would not be viable within their system, where they would have to thoroughly clean an entire mill or alternately install a whole new mill for R120m. This miller did not foresee any change happening in the near future for them, and the second trader said he could not honestly comment on whether there was a trend amongst farmers to go GMO-free or CA, as

Both traders also perceived that there was no demand for CA, GMO-free or organic, and subsequently there was no strategy within their companies to attain certain products or create product ranges that were either GMO-free, organic or farmed with CA practices. One trader confirmed that there was merely demand for GMO-free maize from an insignificant part of the population, a mostly health conscious upper-class society, who at the same time, he criticised, did not understand GMO. There was also no pressure on them from the market side supplied more GMO-free or CA produce. One trader said that they were processing huge volumes and that the odd packet of organic maize, organic flour, non-gluten flour, or GMOfree sold in Woolworths were of such small quantities that they were sourced from completely different channels and producers, rigged to supply such a niche market,

Both traders agreed that for them as big millers, it was not feasible to separately mill and brand for a potential small volume of GMO-free, CA, or organic demand.

*DOI: http://dx.doi.org/10.5772/intechopen.84499*

considered a wide range of products.

still in line with CA principles.

directly from farmers.

which was not theirs to serve.

they were too detached from farmers to comment.

**3.3 Traders and processors with silos and milling**

*Value Chain-Induced Constraints Limiting Scale of Conservation Agriculture in South Africa DOI: http://dx.doi.org/10.5772/intechopen.84499*

#### **3.3 Traders and processors with silos and milling**

*Agricultural Economics - Current Issues*

such a product in future.

insurers charge could be less, which would add economic benefit to the farmers and speed up adoption of CA and a transition to more sustainable farming practices. We interviewed three of the largest insurers, who together cover around 80–90% of the market in South Africa. None of them had a product tailored to accommodate farmers that farmed with CA practices, or a product that supported the adoption of CA, and none of them indicated that they were thinking of having

When confronted with the questions whether they knew about research that evidenced that CA resulted in more climate resilience and less water stress the insurers argued, similar to banks, that their business model with the way the calculations were done for pricing policy premiums, would automatically benefit those farmers who chose good farming practices that gave consistent yield and had the ability to decrease risk of crop loss at the same time. For example, a farmer that could consistently show stable historic yields, even during draught or 'environmental shocks' would automatically get a cost benefit on the premium of the policy, than a farmer that had bumper yields in good years, but suffered great losses during droughts. One insurer said, the principle of insurance hinges around good practice, no matter if you use CvF practices or CA practices. Good practice reflects in the historic records, which they would use to price the premium. However, to attain such benefit the track record and historic proof needed to be in place and that would take a few years before reflecting as a better guarantee against crop loss or as a better price on the policy, or both. Farmers who made use of a lot of fertiliser, yet did not look after their soils, this insurer said, might well be likely to show more yield than CA farmers in bumper years, but were also much more likely to suffer greater losses during challenging years. Another insurer said that a well-developed underwriting process would pick up such fluctuation risks and subsequently price more expensively. When asked whether they as insurer would think about developing products to entice the farmer to take the route of CA and get a better premium without needing to wait many years to benefit, all three interviewed insurers were not thinking of developing such products, nor seemed in favour of it. It would not work with their underwriting principles one insurer argued. One of the few risk mitigating tools they had, this interviewee said, was to work with some form of proof of historical data; you could unfortunately not insure just on a promise that something might happen. All three of the interviewed insurers knew, or had read something about CA being able to reduce risk by being more climate resilient and building soil structure that would enhance the ability of soil to retain more water. However, to one of the insurers drought was less of a risk than crop loss due to hail and for hail CA had no solution. The interviewee said that they were less exposed to drought, as only after germination would their insurance kick in, and because germination would mitigate a large portion of risk the exposure to drought was less risky than hail. For example, if a farmer has not planted because of low rainfall, or the seed has not emerged because of low rainfall, there will not even be a policy in place to claim against, because the policy is only triggered after the seed has emerged. Because their exposure to drought was so low, getting farmers to farm CA would only have a very small effect on their business in any event, not validating the effort to develop

Another insurer challenged the notion that farmers actually understood the relationship between CA, soil organic matter, the ability to store more soil moisture and what that meant for their crops being more climate resilient. To this insurer, the one farmer he knew only wanted to do CA because of the no-till aspect, which saved fuel and was less capital intensive. This farmer was less thinking about CA benefits on future yields being at less risk due to climate change but was more interested in

**74**

reducing costs.

a product targeted at supporting CA.

The interviewed traders and food processors package maize and maize starch products into end consumables that they sell to supermarkets. Consumers' choice in front of retail shelves influences their brand and supporting a procurement of CA produce could attach a sense of sustainability to their brand and grow an awareness amongst their consumers that their brand is ecologically just and fair to the planet's recourse base. The question is if this is a valid and sufficient argument for the traders to get farmers to supply them more CA farmed produce. We interviewed two large traders and food processors in South Africa that were also owned silos and milling operations of maize. Due to their large product profile, their answers considered a wide range of products.

The term CA generally confused both traders as they were not sure how it related to organic and GMO-free farming practices. In contrast to banks that have dedicated agricultural business units with knowledgeable staff, the traders usually purchased produce from other traders and cooperatives, without needing to understand production methods. After explaining CA in a bit more in detail, the interviewee's answers were more cantered around general sustainability including responses around organic and GMO-free produce. The general topic though was still in line with CA principles.

Because the two interviewed traders were buying from other traders, silo owners, and co-operatives, they had no control over what was in the silos from which they attained their maize, or what portion of the maize in a silo was from CA practices. One trader said they would not keep GMO maize separate, even if they had access to it, as they used about 300,000 tons of maize a month and keeping anything separate in their storage, in such type of bulk environments, would not make sense, specifically for South Africa where 70% of maize is farmed as GMO maize. This trader mostly bought from silo owners, other traders and co-ops, and other than during harvest, in order to fill their own silos, they would not buy directly from farmers.

The same trader said that if he had a farmer that farmed using CA, or was GMOfree, it would be just too small for him to go and collect a 100 tons, which is three truck loads, while they are looking for at least, between 3000 and 5000 tons to fill a silo. This trader claimed that such small quantities would not be viable within their system, where they would have to thoroughly clean an entire mill or alternately install a whole new mill for R120m. This miller did not foresee any change happening in the near future for them, and the second trader said he could not honestly comment on whether there was a trend amongst farmers to go GMO-free or CA, as they were too detached from farmers to comment.

Both traders also perceived that there was no demand for CA, GMO-free or organic, and subsequently there was no strategy within their companies to attain certain products or create product ranges that were either GMO-free, organic or farmed with CA practices. One trader confirmed that there was merely demand for GMO-free maize from an insignificant part of the population, a mostly health conscious upper-class society, who at the same time, he criticised, did not understand GMO. There was also no pressure on them from the market side supplied more GMO-free or CA produce. One trader said that they were processing huge volumes and that the odd packet of organic maize, organic flour, non-gluten flour, or GMOfree sold in Woolworths were of such small quantities that they were sourced from completely different channels and producers, rigged to supply such a niche market, which was not theirs to serve.

Both traders agreed that for them as big millers, it was not feasible to separately mill and brand for a potential small volume of GMO-free, CA, or organic demand.

While one trader believed that this situation would not change for them in the near future, the second trader said that they would switch over to GMO-free, once the majority of farmers did so as well and reliable volumes and batches could be processed in that way. However, in contrast to GMO-free, CA was not at all on the radar for them, as the market did not understand what it meant, and the demand was not there.

Around the question of how government could get involved with creating a supportive framework for CA, both responded very similarly in that open market principles of supply and demand should prevail and government should not interfere with legislation or policy. One of the traders said that they did not want a duty on maize, as it existed with wheat, especially where the duty funds disappear and are not invested back into agriculture. This interview participant said that if ever government were to think about a maize duty on such a large staple, it should be used to flow back to agriculture to change the farmers' minds to do CA. One trader responded that government should be careful not to 'play' around with the basic food needs of a nation, and should let free market forces of supply and demand regulate the food supply.

#### **3.4 Supermarkets**

Similar to traders, were supermarkets to support CA through preferential procurement could likely attach a sense of sustainability to their brand and grow also an awareness amongst their consumers for being ecologically just and fair to the planet's recourse base. The question arises whether this is a valid and sufficient argument for retailers, who compared to traders have a direct engagement with end consumers, to encourage farmers to use CA.

We interviewed three major retailers in South Africa, all of whom had some form of sustainably farmed produce on their shelves already. The interview was conducted with senior employees of these organisations who were responsible for, or involved with, the purchasing of farm produce. During the interview, the respondents tended to focus their answers more around sustainably farmed products than specifically CA produce. The retailers, as became clear, have not been confronted with CA produce specifically, but usually with a host of differently and sustainably farmed produce, ranging from organic to low carbon etc.

The retailers did not have dedicated shelves that sold CA produce, as most of them had for organic products; they would either be on the same shelf and branded differently or altogether placed somewhere else. None of the retailers had CA farmed maize in their portfolio, and when asked whether they would buy CA produce if it were readily available, two of the three retailers would probably purchase CA products if there were a demand for CA produce. One retailer said it would be pointless to buy it, if the consumer did not understand what it was. To that retailer, the average consumers was more likely to understand, or have heard about GMOfree or organic produce, but not CA produce.

All three retailers agreed that there was very little understanding from the consumer side about CA, and that it was unlikely to change in future. The retailers said that a lot more education would need to take place for the average consumers to understand CA, or even organic farming, and until then, the demand is low and is likely to stay low.

However, one retailer said that it saw CA practices amongst farmers increasing, independent from market demand. They could see it, for example, through produce like sweet corn, with very successful farmers doing no-till sweet corn. To them, the increase in CA seemed likely, and it would be driven from the farmer side, as the benefits of CA were for the farmer and less for the consumer, at least at this stage.

**77**

practices.

*Value Chain-Induced Constraints Limiting Scale of Conservation Agriculture in South Africa*

If asked whether they would focus specific product ranges on organic, or sustainably farmed produce, the answers varied between the retailers. Although not specifically focussing on product ranges, one retailer had bad experiences of organic produce and subsequently had more grocery line products like olive oil and biscuits that were organic than fresh produce, which they had tested unsuccessfully a few years earlier. This was related to an inconsistency in supply and price premiums of 25–30% for organic produce which consumers were not prepared to pay. The second retailer said that they also did not have any specific focus on organic or sustainably farmed product ranges, but that they had a wide range of produce and groceries,

The third retailer had a very high turnover with one specific fruit and because it was as a high-volume product it was fairly easy to maintain the flow of this organic certified product. Through their programme, they said they would try to get as much sustainable produce as they could, and although it was not easy, the whole idea of the programme was to start making farmers think more about how they

For most retailers, the consumers understood organic farming, but not CA and responded with an unwillingness to start branding another sustainable production method and to educate the consumers. One retailer suggested a softer approach to building a stronger base for sustainability was a better way, than to go out and brand a host of sustainable production methods, it would confuse the consumers. This retailer also argued that the consumer is often very indifferent to whether produce is farmed in a sustainable manner or not. This retailer argued that their own internal research showed that they could, for example, have tomatoes come from a producer that farmed according to their sustainability programme and another that did not and selling the tomatoes at the same price did not make the consumer chose the sustainably-farmed produce more. The retailer reiterated that it is mostly a benefit to the farmer to farm more sustainably, as many of their suppliers farmed their produce less expensively than those who did not farm

From both the grounded theory used to analyse the qualitative interview data and the qualitative data collected we have generated **Table 1**. There are four major themes that we could identify using coding principles of grounded theory and **Table 1** shows for each of those themes how each of the VCPs is positioned against a

While some retailers supported organic products, none of the VCP had any form

of products which supported CA and with exception to one bank, next to none of the VCP were thinking of or prepared to develop products related to CA. This notion also closely relates to the last column on the right, where all retailers and traders indicated that if they were to choose to support either organic or CA, they would support organic because it is an established brand. In other words, no one

Both retailers and traders also indicated that it is very unlikely that any of their clients would demand CA farmed produce as they were also very unlikely to understand what CA was about in first place. Across the board of all interviewed VCPs there was very little support for CA or to drive a change to more CA farming

was prepared to engage in establishing another brand around CA.

with a slightly stronger hold on organic fruit and vegetables.

*DOI: http://dx.doi.org/10.5772/intechopen.84499*

were farming.

sustainably.

theme.

**4. Discussion**

**4.1 Summary of data**

#### *Value Chain-Induced Constraints Limiting Scale of Conservation Agriculture in South Africa DOI: http://dx.doi.org/10.5772/intechopen.84499*

If asked whether they would focus specific product ranges on organic, or sustainably farmed produce, the answers varied between the retailers. Although not specifically focussing on product ranges, one retailer had bad experiences of organic produce and subsequently had more grocery line products like olive oil and biscuits that were organic than fresh produce, which they had tested unsuccessfully a few years earlier. This was related to an inconsistency in supply and price premiums of 25–30% for organic produce which consumers were not prepared to pay. The second retailer said that they also did not have any specific focus on organic or sustainably farmed product ranges, but that they had a wide range of produce and groceries, with a slightly stronger hold on organic fruit and vegetables.

The third retailer had a very high turnover with one specific fruit and because it was as a high-volume product it was fairly easy to maintain the flow of this organic certified product. Through their programme, they said they would try to get as much sustainable produce as they could, and although it was not easy, the whole idea of the programme was to start making farmers think more about how they were farming.

For most retailers, the consumers understood organic farming, but not CA and responded with an unwillingness to start branding another sustainable production method and to educate the consumers. One retailer suggested a softer approach to building a stronger base for sustainability was a better way, than to go out and brand a host of sustainable production methods, it would confuse the consumers.

This retailer also argued that the consumer is often very indifferent to whether produce is farmed in a sustainable manner or not. This retailer argued that their own internal research showed that they could, for example, have tomatoes come from a producer that farmed according to their sustainability programme and another that did not and selling the tomatoes at the same price did not make the consumer chose the sustainably-farmed produce more. The retailer reiterated that it is mostly a benefit to the farmer to farm more sustainably, as many of their suppliers farmed their produce less expensively than those who did not farm sustainably.
