The horticultural industry is a complicated network of intensive businesses that all seek to obtain a slice of the horticultural pie. The South African agricultural business sector is highly competitive and diversified. A simple graphical layout of the businesses that play a significant role in the horticultural industry is presented in the figure below. Each business type has a significant role to play in the agricultural sector
The horticultural industry is grouped into four basic components each serving its own sector and each being supported by different markets and businesses.
Fresh market industry
The fresh market sector is the largest sector of the four. It currently consists of approximately 8,000 commercial farmers. Before 1980 it is estimated that there were approximately 80,000 commercial farmers. The decline in commercial farmers does not imply that less land is being cultivated, quote the contrary, there are less farmers producing more produce but each farmer has more land. There has also been a shift from single manager farmers to large corporate farms producing a couple of crops. The largest tomato farm is approximately 1,750 ha and the largest maize farm is approximately 35,000 ha.
Large corporate farms do not have to be close to markets in order to be profitable. Due to economies of scale, they can use large vehicles to transport huge amounts of vegetables at a time. Thus the transport cost per unit of produce is reduced. Large corporate farms also have the advantage of bargaining power with regards to the price they obtain on the fresh produce markets.
The processing industry
Freezing, canning and dehydration are major mechanisms by which food is preserved. All produce sold to processing factories are done through contracts. These contracts specify the conditions under which the crop has to be grown. They even specify which varieties, fertilizers and spray programmes. What makes the processing industry so attractive to farmers is the stable price mechanism in comparison with the volatile open markets. The four major processing crops are sweet corn, peas, beans snap beans and tomatoes.
The greenhouse industry is a very young industry and also very small in comparison with the fresh market and processing industry. The total area under greenhouses is less than 300 ha. However, it is a growing market that is satisfying the needs of a selected customers which are willing to pay top prices for high quality produce. The reason why the greenhouse industry is small is because it is expensive to set up and more difficult to run than conventional farming. Greenhouse production has less tolerance to make mistakes in than conventional farming. The greenhouse industry is probably to way to the future in terms of crop production because it uses water more efficiently than conventional systems and uses less land for much higher yields.
Specialty crops industry
Specialty crops are crops such as herbs, chicory, rhubarb, water cress, garlic, mushrooms and germinated seed industry (these seeds are used for salads). It is a highly specialised industry known by a few people because it is also extremely difficult to produce these crops. The mushroom industry is also controlled by a few large companies in South Africa. This might sound unfair, but if a large amount of producers should enter the mushroom market, it would affect the price of the product in such a way that many other smaller mushroom concerns would go bankrupt within a year.
Garlic is also an industry that is closely regulated. The reason is not to restrict new farmers to enter the industry, but rather to protect the farmer against new planting material that is infected with viruses. Garlic growers belong to an association from which the buy their vegetative material in order to plant new plantings. The vegetative material is virus free unlike the imported material which has a virus in and kills the plant or renders the final garlic clove unmarketable.
The chicory industry is highly specialized and is concentrated in the Eastern Cape. All growers grow chicory under contract. The chicory is then milled and used for coffee.
Although very small, the informal agricultural industry plays an important role in job creation and self sufficiency. Quite often these sectors are willing to sell their produce at informal locations close to buyers. It is interesting that these markets also cater for specific produce that larger retailers are not will to offer.
Price is a factor. The informal sector is not always cheaper, but they are quite often more accessible and convenient to buyers. Their grouping and packaging of products are also based on buyers needs rather than warehouse and store requirements.