AgriFeed Holdings — Procurement & Supply Chain
The raw-material procurement strategy, the maize, soya and additive supply chain, supplier and farmer relationships, logistics, and inventory and price-risk management.
Section 8 · Business Plan
Procurement & Supply Chain
The raw-material procurement strategy, the maize, soya and additive supply chain, supplier and farmer relationships, logistics, and inventory and price-risk management.
Raw materials represent 78–84% of revenue at the operating
gross-margin line. The professionalism, technology, and discipline of
AgriFeed’s procurement function is therefore the single most important
determinant of long-run profitability. The Company will operate a
centralised procurement function under a dedicated Chief Procurement
Officer (reporting to the COO) supported by a four-person trading desk
and a contract-grower programme.
8.1 Raw Material Bill of Materials (Indicative)
| Ingredient | % of BOM (Y3) | Source | Procurement Mode |
|---|---|---|---|
| Yellow maize | 39% | Mpumalanga, FS, NW; Argentina spot top-up | SAFEX hedged + grower contracts |
| Soybean meal | 21% | Argentina (Cordoba), Brazil, RSA crushers | Forward contracts + USD hedge |
| Sunflower meal | 8% | RSA Free State, NW | Direct from crushers |
| Wheat bran / pollard | 6% | RSA national millers | Annual offtake agreement |
| Maize gluten / DDGS | 5% | RSA wet-millers; selected imports | Spot + forward |
| Limestone & calcium | 3% | RSA local quarries | 12-month framework |
| Methionine, lysine | 4% | Evonik, Adisseo, CJ | Quarterly contract + USD hedge |
| Premix & micros | 5% | DSM-Firmenich, Cargill Premix | Monthly call-off |
| Vegetable oil & fats | 3% | RSA refiners; palm imports | Forward + spot |
| Other (bones, fishmeal, additives) | 6% | Multiple | Mixed |
8.2 Risk Mitigation Strategy
Maize Strategy
Maize is procured under a layered approach: (i) up to 60% of forecast
12-month requirement is locked under SAFEX and direct-grower forward
contracts at the start of each procurement cycle; (ii) 20–25% is
procured through agreed forward-pricing windows at predetermined trigger
levels; and (iii) the balance is bought on spot to retain optionality on
shorter-cycle SKUs. A direct grower programme with approximately 35
commercial farmers in the eastern Highveld provides 100,000 tons of
contracted maize supply by Year 3, of which approximately 20,000 tons is
sourced from emerging commercial farmers participating in joint
AgriFeed–DALRRD programmes.
Soybean Meal Strategy
Soybean meal is the single largest exposure to ZAR/USD volatility.
Procurement is split: 70% via 3–6 month forward contracts with two
preferred trading houses (Argentine and Brazilian origin), 20% via
domestic crushers, and the balance via opportunistic spot. ZAR/USD
exposure on the forward book is hedged 60–80% via FECs and zero-cost
collars over a rolling six-month window.
Storage & Working Capital
The Phase 1 site will hold an average of 14 days’ total raw-material
cover (approximately 8,000 t at full ramp), with peaks to 21 days during
harvest-window inflows. This is below industry average (18–22 days),
reflecting (i) the proximity to local maize supply, (ii) the discipline
of the trading desk, and (iii) optimised SKU-to-silo assignment. Lower
storage requirement translates directly into reduced working capital and
improved return on invested capital.
Confidential — this business plan is provided to prospective investors and lenders for evaluation purposes only and may not be reproduced or distributed without the written consent of AgriFeed Holdings (Pty) Ltd.