Financial prudency crucial for farmers amidst climate change
Therehavebeentalksofclimatechange for some time now, and how that has an impact on all industries, but more so the agricultural industry. But what has the impact been and what do we, as farmers, need to do in response to climate change?
The global agricultural industry, food systems and supply chain are under immense pressure as a consequence of climate change. The outcome has been more intense weather events and water scarcity increases in some regions, while we have witnessed severe rainfall in others. Additionally, we are experiencing altered temperature patterns and increased pest pressure. All these changes have an impact on farming activities, such as a decrease in crop and livestock productivity in most regions.
As a result, this will impact the price, quantity and quality of food production and farming productivity, as well as operational costs in general, resulting in more difficult supply chains.
Since farming puts food on our tables, this has an enormous impact on food prices, food security and financial performance.
So, how are we, as farmers, responding to these severe climate change challenges, what financial strategies can we put in place to mitigate and at the very least, minimise the impact?
In cases like these, financial management becomes critical and a point of control, where one has to ensure cost reductions whilst simultaneously focusing on increasing sales.
Below are some tips that may be considered to tackle financial management in response to uncertainties brought by climate change.
Diversify income streams
Reliance on one farming product places you at higher risk, hence the need to diversify the product you produce with your farming. Climate change has disrupted the way we farm, and we can no longer afford to ignore its impact on farming income.
You may have to diversify your farming with crop production, livestock, value-added products and many other options, depending on your land accessibility and land productivity.
Diversification will allow you to increase your source of income and spread the risks, consequently creating a buffer against climate change.
Keeping an eye on where your income comes from and which products are easier to produce under the given circumstances as a tool of financial management helps farmers monitor and control the profitability of their different farming units, allocate resources efficiently and, in turn, ensure management of cash flow during transitional periods.
Invest in climate-smart technology
Streamlining farming operations helps in managing the impact of climate change. Too many times, I have heard people say, “We have been doing it like that for years”, but times have changed, and only those who change with the times survive in the long run.
As farmers, we need to adapt to the changing times, and capitalise on the technological advancement that is taking place all over the world. What can we implement on farms, and what will work for us? This is not a one-size-fits-all approach.
What is your current pain point, what are your challenges, what technologies are affordable, and what technologies can you invest in that you can afford and that will streamline your operations, reduce costs and increase productivity and consequently profitability?
Thus, you may need to invest in climate-resilient infrastructure. For example, there is a huge need for us to invest in irrigation systems, water storage tanks and greenhouse equipment, as water scarcity is one of our main challenges, given the insufficient rains we have received.
Additionally, one may invest in more climate-smart technologies like weather monitoring systems, drought-resistant crop varieties and precision agriculture tools.
Financial institutions’ expectations may change as farmers’ financial needs continue evolving due to climate change and the risks posed to affordability. Therefore, additional innovation and support systems will be needed to continue meeting clients’ needs in the future.