GraceKennedy Limited, a large buyer of agricultural crops as inputs for its food manufacturing operations, is taking a more direct interest in farming under a new partnership with the Jamaican Government to supply its St Elizabeth factory.
Previously, the conglomerate provided technical support to farmers in its supply chain. Now, it will be more involved as an agro park investor, utilising lands leased in the parish.
On Tuesday, Group CEO Don Wehby told the Financial Gleaner that Grace Agro-Processors, a division of GK Foods & Services Limited, is partnering with the Ministry of Industry, Commerce, Agriculture and Fisheries, MICAF, to establish the agro park on 110 acres at Ridge Pen in proximity to its processing plant in the neighbouring district of Hounslow.
GraceKennedy is not expected to till the soil itself. Instead, it will sublease plots on the property to different farmers, who will have GK as a guaranteed buyer for their output.
The company expects planting of crops to begin in November of this year and for reaping to begin in May 2019.
“GK has entered into a lease with private owners to secure the land, which it will sublease to members of its supply chain to facilitate an expansion of their crop production. In addition to land, GK will facilitate access to specialised equipment to mechanise the land preparation and planting processes, making the participating farmers’ operation substantially more efficient,” Wehby explained.
The GraceKennedy conglomerate is heavily invested in food and financial services. Food trading brings in the majority of revenue, and is highly profitable for the conglomerate, but its money and financial services segments has a better track record on net margins, that is, the proportion of revenue that flows to the bottom line.
That trend was borne out again in the first quarter ending March when food trading accounted for $20 billion, or 80 per cent, of the $24.91 billion in revenue for the period, but less than half, or $841 million, of the $1.86 billion of pretax profit, before inter-segment eliminations, reported by the conglomerate. The financial division contributed 20 per cent of revenue while accounting for $1.02 billion in pretax profit.
For the group, revenue grew five per cent, while net profit spiked by nearly 15 per cent to $1.3 billion for the March quarter.
Ridge Pen key
GraceKennedy opened its Hounslow facility in 2011 after investing $43 million in the facility to produce pepper mash, and package fresh vegetables. The company contracts farmers to supply about 45,000 pounds of West Indian red and Jamaican Scotch bonnet peppers to be processed as mash for sauces, as well as carrots, cabbage, lettuce, callaloo and onions.
The facility is equipped to produce, process and distribute fresh produce to the retail and hotel trades, and to export pepper mash.
Wehby said Grace Agro-Processors will assist participating farmers in its Ridge Pen Agro Park with access to financing for the inputs required to implement best practices; share the results of its research on its supply chain, including “a custom-made nutrition programme and improved planting material”; and provide guidance on achieving Global GAP certification for farms.
MICAF will handle the infrastructure works for irrigation, roadways and drainage, and assist with the procurement of additional lands for future expansion, he said.
However, Wehby said he was not at liberty to disclose the investment in the overall project, citing “deference to the partnerships,” while noting that it was substantial and projected to grow output along GK’s supply chain by more than 50 per cent.
Plans for a ‘mother farm’
Wehby also expects Ridge Pen to eventually become the “mother farm”, whose practices will be copied by the various farmers within GK’s supply chain.
“The intention is for the mother farm to act as a commercial-size tutorial example of all the best practices at work,” he said. It will include experimental plots to test the efficacy of new methods, technologies and crop varieties, as well as a seed bank to be developed “from true to type, healthy, high-yielding plants at the mother farm to facilitate access to quality planting material for the rest of the supply chain,” he said.
“The mother farm will also act as a central collecting point for smaller farmers nearby to meet the delivery trucks transporting produce to the factory,” Wehby noted.
By converting 110 acres of idle lands “and putting it into the hands of skilled farmers eager to expand production, GK’s intention is to create a reusable model for supply chain capacity improvement, through the establishment of a well-utilised, efficiently operated agro park facilitated by public-private partnership which, in the medium term, will increase production, reduce imports and increase exports,” he said.