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Increasing value and building self-reliance within supply chains: Should farmers process their produce independently?

04/10/2022

BEFORE finished goods reach supermarket shelves, the raw materials used to produce them undergo a variety of processes, which involve several independent entities. The farming sector is the starting point of it all, linking agriculture, manufacturing and final consumers together.

In spite of the important role it plays, however, farmers tend to be an afterthought within supply chains, as they are often not integrated in secondary processing activities.

Due to the complexity of food production supply chains, farmers lose a significant portion of their earnings due to having to rely on manufacturers to process raw goods, and often have little to no bargaining power.

“More often than not, farmers let third parties process raw goods in order to create ready-to-sell products, yet this extra step can be a costly one for them,” comments Ian Hart, Business Development Director at adi Projects, a division of the multidisciplinary engineering firm adi Group.

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“To extract the most possible value out of their businesses, farmers should consider investing in the equipment needed to convert raw goods into ready-to-sell products independently.

“Someone who farms potatoes, for instance, would benefit more from being able to turn them into ready-to-sell frozen mash or chips as opposed to paying a company to do the manufacturing on their behalf.

“Cutting out the middleman can mean minimum investment and more substantial returns,” adds Ian.

Being in charge of their own production facilities can also empower farmers to reduce carbon emissions by eliminating the need for additional transportation, removing a leg – and a particularly environmentally disruptive one – from the supply chain.

“While there’s initial expenses associated with building food processing plants, this type of self-sufficiency is just what farmers need to make a positive impact on the environment, which includes reducing waste, too.

“The value stemming from the ability to recycle and reuse or repurpose defective produce that would otherwise be disposed of by third parties should not be underestimated. It could increase the overall value of a farmer’s product by an estimated 25-50%,” says Ian.

And the steep prices and tricky requirements set out by supermarkets are part of the problems affecting food production, too; one need only cast their mind back to the farmers’ protests over supermarket milk prices in 2015.

With a recent survey showing that only 5% of farmers are willing to sell to supermarkets, it is clear many feel there’s a need to shift to more farmer-focused supply chains capable of taking their needs into account, and building independent food processing facilities can be a significant step forward for farmers.

“An increasing number of farmers are now working to produce their own finished goods, eliminating the costly barriers in-between raw materials and ready-to-sell products, yet others still need additional support in order to set things in motion,” comments Ian.

Changing the structure of supply chains for the better will require the collective efforts of many, as well as the necessary assistance from experts in the field.

adi Group can offer support by engineering the technology required to create food processing plants and helping farmers with the relevant operations and compliance, providing guidance every step of the way. For more information, get in touch today.

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