South Africa’s crop farmers are expected to struggle as they look to secure crop financing and insurance cover needed to successfully cultivate a crop and mitigate the risk of failure owing to climate variations, with the upcoming maize planting season looming, says Nedbank Corporate and Investment Banking Africa head of global commodity finance Zhann Meyer.

Climate change, as well as the impression of one of the worst droughts in decades during 2015, remained one of the biggest challenges facing South Africa’s crop farmers, he said in a statement on Tuesday.

Vast areas of the maize triangle had experienced the worst drought to take place in 23 years and, therefore, moisture levels in the soil were already low.  Subsequently, input cost financiers and suppliers of credit into the industry, in general, would be reluctant to allow planters into fields where proof of adequate moisture levels and chemical soil mapping and rectification cannot be provided.

“While these are risks that have traditionally been offset by insurance policies in the form of multiperil or hail insurance cover, this type of cover has become increasingly expensive with many of the traditional crop insurers no longer willing to provide or increase cover in certain areas owing to the risks that climate change is presenting.

“As a result, it is difficult for farmers to secure financing unless they have other collateral or solutions in place to mitigate against the risk of drought and the resulting low or no harvests,” Meyer noted.

These solutions included the use of irrigation systems and precision farming technology to ensure maximum yields in normal rainfall years.

“Advancements in technology also mean farmers have access to drought resistant seed strains as well as quicker growing cultivars, which narrows the window for things to go wrong,” he explained, adding the faster crops reached maturity, the later they could effectively be planted in the season, which was a huge advantage should summer rains be delayed.

Innovative brokers and underwriters were also exploring index-based weather derivative and credit-based products. This required a lot of historical data on rainfall, heat units and other weather factors to base these indexes on, which is reasonably accurate and available in South Africa, but often not in the rest of Africa. Farmers were also taking the initiative in this regard and were putting up weather stations on their farms to gather point-specific data.