How to Maximise ROI from Your Farm

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How to Maximise ROI from Your Farm: When aiming to get the most return on investment, the location of your farm business will determine what type of farming activities are viable to pursue.

Also, the condition of South Africa’s agricultural sector highly depends on the sustainability of different farming methods used across the country.

In the arid regions along the north-western coastline, most of the current agricultural activity involves cattle ranching and sheep farming; whereas areas with high summer rainfall provide the ideal landscape and climate for intensive crop production.

Sowing the staples

Maize is the most important grain crop produced across South Africa, an average of 2.65 million hectares of commercial maize is planted every year.

To reach maturity, each maize plant requires 250 litres of water, which is no mean feat with the El Nino weather system likely to trigger another drought blow.

Commercial farmers spend roughly R7,500 per hectare to plant maize, and it can be very uncertain whether they will make that initial investment back. In favourable climates and environments, maize farming can be a steady and lucrative business; one seed of maize can produce more than 500 kernels in return at harvest. Maize also matures quickly; from the time the seed is planted, maize only needs between 90 to 120 days to reach harvest.

Alternative farming methods

Dry farming is an alternative agricultural technique for farmers growing drought-tolerant crops such as soybeans, sorghum and millets; this method focuses on crop production without the need of irrigations systems.

How to Maximise ROI from Your Farm
How to Maximise ROI from Your Farm (Green corn field in the sunset.)

This is a common system used by grape farmers who are cultivating wines with complex flavours, as the roots grow deeper into the soil to reach the most moisture. However, if you’re keen to plant a vineyard on your land, conduct thorough research into the wine production industry.

In 2016, the average return on investment at producer level reduced to less than 1%, this was mainly due to the prolonged drought in certain regions, stagnant wine price and cost inflation. Research found that only 13% of the 3,300 producers farm at sustainable income levels; 44% of operators are breaking even; and a worrying 40% of South African wine producers are making a loss.

A fruitful future

If your land is in the Eastern Cape and KwaZulu-Natal, then you’re in a prime area for growing pineapples.

In these areas the climate is warm, humid and exempt from extreme temperatures; 25 degrees Celsius is the optimal temperature for growing pineapples. The fruit is planted between July and December, and mildly acid soil types are best.

One hectare is enough land to produce an average of 30 tonnes of pineapples; after two years of a successful harvest, pineapple growers could potentially start to see a profit.

Tropical fruits such as bananas, avocados and mangos are also grown in the northeast. Avocado farming is a stable market in South Africa; the farm-gate price of this ‘green gold’ fruit has risen 130% over the last 10 years.

The avocado season extends from mid-March to September, and it takes around six years to get an avocado plantation into production. This might seem like a long time, but the return on this investment and the growing demand for the product in European and British markets, makes farming this fruit worth the wait.

If you also plan to crow crops as well as rear livestock, you can potentially reduce risk, spread labour and re-utilise resources for your farm business.

Again, the location of your farm and the rainfall, radiation, soil type and disease pressure will all determine whether it is possible for you to go into mixed farming.

Efficiency is key in dairy

If you’re keen to include livestock on your land, consider the size and gradient of your space. For those farmers keen to break into the diary market, firstly consider what breed of cow will suit the local conditions of your farm.

Many large commercial dairy farmers are expanding their operations, while smaller farms are failing to see a healthy ROI.

In order to be a successful small dairy farmer, you must run a very efficient operation. For a farmer to get a good return on your invested capital, you need to have at least 150 to 200 cows.

There are four breeds that are reared on commercial farms as specialist dairy cows; these are Holsteins, Ayrshires, Jerseys and Guernseys.

These imported breeds require high-quality feed and good living conditions, with plenty of shade and water. Local South African cattle breeds are robust, better at surviving severe weather conditions and generally live longer; however, their milk yield is lower compared to specialist dairy breeds.

Profitable sheep breeding

Sheep are well-adapted to the diverse climate conditions of South Africa; there are around 30 million sheep across the country, in areas such as Northern Cape, Eastern Cape, Western Cape, Mpumalanga and North West.

To maximise your profits, first establish the capacity of sheep you can rear to ensure your land is not overgrazed, as this will eventually lead to erosion which will negatively affect the carrying capacity of your land in the future.

The breed of sheep is important too; the Dormer breed offers high fertility rates, with ewes typically producing twins or higher multiples, this can help you improve sustainability and profitability to get a quicker return on your investment.

You can expect an ewe in-lamb to sell for R5,600, and ewes that are seven to eight months old too sell for R3,500.

The risks of poultry farming

How to Maximise ROI from Your Farm
How to Maximise ROI from Your Farm (Shot of a harvester in the field)

If you have a small plot of land, you may consider going into the poultry meat market, which is the largest segment of the South African agricultural sector, contributing to more than 16% to the gross domestic product.

However, as with many agricultural ventures, there are risks involved in rearing poultry; feed is one of the biggest production costs for broilers, which consists of approximately 65% maize and 25% soya bean meal.

This cost can fluctuate dramatically, as grain prices increase or decrease in the market. So, producing your own animal feed on your farm and striving to be a sustainable operator could be a great way to manage this expense and control your costs.

Also ensure that you’re well-informed on Avian Influenza, more commonly known as Bird Flu; if this disease breaks out onto your farm it could have a devastating effect on your livestock.

Considering farm expansion

If you own a farm on the outskirts of a large town or city, another strong option is to utilise your land by operating a business that doesn’t involve crops or livestock.

Offering a caravan or camping site to travellers and holiday makers could be a great way to make a healthy return on your investment with little risk involved and a growing market.

With tourism figures seeing an overall increase in growth of 1.7% compared to last year’s figures, this amounts to 8.6 million international tourists.

One of the clearest benefits to owning a farm are the various options for expansion and to utilise your farm land. Choose what is manageable, affordable and in demand for your location and you will be able to reap the rewards of your hard work in no time.

 By Krystena Griffin, Writer for all of the Dynamis brands including BusinessesforSale.com, FranchiseSales.com, PropertySales.com.