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PRESS RELEASE: Location Differential

02 Dec 2013

It was with disappointment that Grain SA took note that the JSE decided not to do away with the location differential for wheat for the Western Cape for the 2014/15 season. “We are deeply disappointed that the JSE did not even see their way through to try it on an experimental basis,” was the reaction of Jannie de Villiers, CEO of Grain SA in Pretoria today. Our responsibility was to get this matter onto the agenda of the JSE, to motivate it properly and to allow democracy to find its own way. We are of the opinion that the majority of the producers were prepared to take this risk to ensure that the uncertainty and non-transparency comes to an end. Apparently the other role players in the market are seriously divided about this matter.

Because of the controversy thereof, the location differential has already been investigated by the NAMC, Prof Matt Roberts of the USA and the Competition Commission and has also been evaluated by the JSE advisory committee a couple of times. The FSB (Financial Services Board) even checked all the documents and commentaries before offering their support to the JSE’s decision.

It feels as if we have ended up in a cul-de-sac. However, our focus will now be on the method of calculation of the location differential and to promote basis trading. Other ways and means used by Grain SA to counteract the impact of the location differential are to improve the rail transport system (rail transport is cheaper than road transport) and to find international markets for our grains and oil seeds to be able to improve the balance between the demand and supply thereof.

Grain SA also took note of the decision of the JSE to maintain the status quo for not only the wheat industry, but also for other grains and oil seeds. Information that came to light during the evaluation period is that premiums were paid in the Western Cape for wheat. However, the question is whether those premiums were divided fairly between the producers and other role players.

Grain SA also welcomes the JSE’s commitment to supply the market with information similar to the ‘Commitment of Traders Report’.

Jannie de Villiers
086 004 7246