Davies approves wheat reference price rise

Image: GCIS

Wheat is an internationally traded commodity and several of South Africa's trading partners subsidise their wheat farmers. The domestic industry has been experiencing falling profitability and diminishing returns since 2000/03‚ with the result that South Africa has become a net importer of wheat.

The International Trade Administration Commission of South Africa (Itac) has recommended an increase in the domestic dollar-based reference price in wheat from US$215 a ton to US294 a ton. Davies approved its recommendation at the end of April.

Grain SA‚ which brought the application‚ said the existing free-of-duty rate‚ in terms of the variable tariff formula‚ did not provide sufficient protection or encouragement for the wheat farmingsector to expand its production capacity.

Itac chief commissioner Siyabulela Tsengiwe says the variable tariff dispensation operates on the premise that domestic prices should be equal to a notional long-term world reference price after adjustments for transport costs and the subsidies provided by some other wheat-producing countries.

"To achieve this‚ the specific customs duty for wheat is calculated as the difference between the domestic reference price for wheat and the world reference price‚" he said in a statement issued by Itac.

The domestic reference price is based on the five-year average of US No 2 Hard Red Winter Gulf price‚ after adjustments for shipping costs and subsidies and the world reference price is the three-week moving average US No 2 Hard Red Winter Gulf price "as published in the International Wheat Council Grain Market Report".

Grain SA senior economist Wessel Lemmer said Grain SA welcomed the increase‚ although it had asked for the price to be increased to US$326 a ton.