• Good news regarding fuel prices - June 2012
• Fertiliser price projections for June 2012
• Grain SA's wheat tariff application submitted on 24 April
• Producer deliveries: maize
• Exclusive benefits at Grain SA's NAMPO Harvest Day 2012

Good news for producers is that reasonable cuts in fuel prices can be expected. According to the most recent information from the Central Energy Fund, the petrol price can DECREASE by 38 cents per litre and the diesel price by 20 cents per litre on 6 June 2012. These expected cuts are mainly the result of the current lower international oil price. The oil price stood at an average of US$120 per barrel in April, while oil traded at an average of US$116 per barrel over the past month. These decreases can largely be attributed to weaker economic conditions in Europe.The rand strengthened during the same period and this brings about further cuts in fuel prices.

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  International trends in fertiliser prices can be used to predict changes in local fertiliser prices relatively accurately. From April 2012 until the first week in May international fertiliser prices changed as follows (Table 1):

Table 1:
 

Table 2 contains the movements in international fertiliser prices in rand terms. The table shows that the international prices of ammonia and urea increased quite sharply by 8,4% and 6,0% respectively. The prices of DAP and potassium chloride declined by 2,9% and 0,8% respectively over the same period. If this trend was to continue in May, we can expect nitrogen prices to rise in June, while phosphate prices could drop.

International reports indicate that the reason for the recent increase in international urea prices was mainly due to a strong demand from the USA as a result of large maize plantings. However, prices are expected to cool down and decline again towards the middle of the year.

Historical fertiliser price statistics

Tables 3 and 4indicate the movement of international fertiliser prices in dollar and rand terms over a period of a year. The graphs show clearly that the prices of urea and potassium chloride rose excessively. The weakening of the rand over the period of a year increased the rise in rand terms.

Table 4
 

Table 5shows what happened to local fertiliser prices over a period of a year.

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  The proposed planting of wheat in the Free State declined by 25% this year, and wheat plantings are at the lowest levels recorded since 1936. On 24 April, Grain SA applied for a higher wheat tariff. The average international USA HRW #2 wheat price for the past five years amounted to US$288/ton, compared to the current reference price of US$215/ton. A wheat tariff will only kick in if the international wheat price were to drop lower than US$215/ton. Measured against the five-year average of US$288/ton, it is clear that the current reference price level is far too low.

In addition to the US$288/ton, the application by Grain SA includes a factor of 10,35% (US$29,84/ton) that makes provision for the subsidies paid to producers in wheat export countries. Unfortunately, the average sea freight cost of US$36,95/ton is subtracted, as it is regarded as a geographic location benefit that does not form part of the wheat tariff. Consequently the amount is subtracted from the subtotal of US$318,15 to provide a reference price level of US$281,20/ton.

The current wheat supply constitutes only 47% of our country’s needs. For the sake of food security, the figure should be closer to international norms, which are around 85%. To achieve this, the reference price has to be increased further because the current level according to the tariff formula (US$281,20/ton) is still not enough to allow the wheat industry to recover.

Historical data shows that producer outputs increase as soon as the relative price ratio between the bread price and the wheat price favours wheat production. The bread price does not necessarily increase under these circumstances. According to Grain SA’s calculations, the import tariff should be adjusted further by a self-sufficiency factor of 1,158 or US$44,43/ton. The result is a reference price of US$326/ton. This will introduce a tariff of approximately R233/ton.

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Producer deliveries for both yellow and white maize increased sharply since 12 March.  Consequently prices traded lower.  However international market prices are supportive.  Note that the market is expecting that the WASDE report on Thursday 10 May may have an impact on prices.
 

Members of Grain SA can look forward to exclusive benefits again this year at the annual NAMPO Harvest Day, which will be held from 15 to 18 May. Free entry and an exclusive parking area make it easy for members to gain access to the Harvest Day grounds. There is also a Grain SA members’ venue where young and old can enjoy a nice cup of coffee and refreshments.

Letters with the relevant information were sent to members, but if you have not yet received your letter, please contact Rika van Niekerk at 071 641 9243.

At a previous meeting of The Executive, it was decided that members who pay a levy of more than R5 000, qualify for two additional entrance tickets, and that members may use the exclusive members’ parking for all four days of the Harvest Day. Arrangements in this regard should be made at the members’ venue.

Please note that members who fly in to NAMPO Park must please purchase tickets at the North Gate, after which you will be reimbursed at the members’ venue, as your member code is not valid at the North Gate.

See you at Grain SA’s Harvest Day.

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FOR MORE INFORMATION, CONTACT THE RELEVANT GRAIN SA PERSONNEL MEMBER AT (056) 515-2145 OR VISIT THE WEBSITE AT www.grainsa.co.za