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Location Differential For Wheat

06 Sep 2013
Grain SA has spent an enormous amount of management time the past two weeks in discussions with farmers and negotiations with the JSE regarding the principle of location differentials. Grain SA realises that the implementation of a differential for wheat for 2013/14 was inevitable as some contracts have already been traded.

"Our discussions with the JSE were not just focused on the levels of the differential for this season, but on a total new dispensation for 2014/15. We are very optimistic that this year's debate about the differential for the wheat industry will not be repeated next year", said Jannie de Villiers, CEO of Grain SA. Grain SA is in favour of extending the free market and to do away with the differential. The market is mature enough for role players to find each other regarding transport costs.

"We are in a process to document our proposals for a new dispensation for wheat, which will be the result of many years of frustration and robust debates," De Villiers said. Grain SA calls on the role players in the market to table new and fresh initiatives to expand the free market and to allow the participants to find each other without the invervention of a differential. The fact that the differential forms such an integral part of the ultimate price for the farmer, will always remain in dispute as long as a third party, like the JSE, determines it. Irrespective of the independence of the JSE, it is always better for the buyers and sellers to deal directly with each other.

The average increase of 24,31% (Western Cape 33%) in the announced differential will impact very negatively on the profitability and production of wheat. Dr Rob Davies (Minister of Trade & Industry) recently declared the wheat industry an industry in distress. The National Crop Estimates Committee of the Department of Agriculture, Forestry and Fisheries estimated that the hectares planted under wheat for this season to be the second lowest since 1935.

"The removal of the differential is one of Grain SA's strategic objectives, and we will continue to promote a free market with the minimum interference," De Villiers concluded.

To see a video about this matter, click here.


Wessel Lemmer
Jannie de Villiers
086 004 7246