Wheat

The wheat industry entered a new era during 1999, when a tariff on imported wheat was announced. The price of wheat increased drastically. The announcement was apparently too late to have an effect on the area planted to wheat during the 1999/2000 season, but it was probably responsible for the large increase in plantings for the 2000/01 season. The increase in protection for wheat producers was necessary because the commitments to reduce subsidies and assistance to farmers by the major exporting countries had not yet taken effect. This step had a positive impact on the wheat price, the price of flour and on bread prices.

Wheat is planted mainly between mid-April and mid-June in the winter rainfall area and between mid-May and the end of July in the summer rainfall area. Most of the wheat produced in South Africa is bread wheat, with a little durum wheat produced in certain areas.

Areas planted and production

For many years, the south-western parts of the Western Cape (known as Swartland and Rûens) with its reliable winter rainfall was the most important wheat producing area in South Africa. The eastern Free State has now overtaken the Western Cape as the major wheat producing area in South Africa. Production has also increased in areas where irrigation is possible, especially along the Orange River.

The estimated area planted to wheat for the 2000/01 season is 860 000 ha, of which 370 000 ha are in the Free State and 360 000 ha in the Western Cape—an increase of 19,8% in plantings from the 1999/2000 season. This can be ascribed to higher wheat prices, owing to the import tariff on wheat, and a decrease in production by the USA.

The areas planted to and production of wheat are depicted in the following graph:

* Preliminary

The production of wheat for the 2000/01 season is estimated at 2,06 million tons, with an expected yield of 2,39 t/ha. In the Western Cape Province, the rainfall was below normal for the current season and also came very late. This caused plantings to be late and the early development of the wheat plants to be delayed. Conditions in the Free State Province were good due to high soil moisture levels carried over from the previous season. Good rains fell over most of the country during September 2000 and cooler weather conditions resulted in higher yields in irrigation areas.

Plantings, production and the yields of wheat from 1996/97 to 2000/01 are as follows:

* Preliminary

Consumption

A total quantity of 3,1 million tons of wheat were available for local consumption during the 1999/2000 marketing season. Carry-over stocks as at 1 October 1999 amounted to 771 000 tons, local production during the 1999/2000 production season was estimated at approximately 1,73 million tons, while an amount of 624 000 tons was imported during the period 1 October 1999 to the end of September 2000.

In South Africa, wheat is mainly used for human consumption. For the 1999/2000 marketing year, approximately 2 348 000 tons of wheat were used for human consumption, 13 000 tons for animal feed and 26 000 tons for seed. Altogether 133 000 tons of wheat were retained on farms. The total domestic commercial demand was 2 517 000 tons and 55 000 tons were exported. The total demand for wheat for the 1999/2000 season was therefore 2 572 000 tons. Opening stocks for the 2000/01 season were approximately 548 000 tons. This is higher than the required 3 month pipeline stock of 392 000 tons, but significantly lower than the previous year’s opening stock of 771 000 tons. Physical shortages have been experienced in the local wheat market since June 2000.

Prices

The import duty on wheat came into effect on 14 April 1999. It was introduced at R181/ton (± 20% ad valorem), and the duty on flour was set at R270,20/ton plus an additional 40% ad valorem duty. Various adjustments were also made to customs duties applicable to related products. The tariff on wheat was increased to R269/ton on 11 June 1999, while the tariff on flour was increased to R403,50/ton plus 30% ad valorem duty. The ad valorem duty will be phased out to 0% by 1 January 2003.

The introduction of the wheat tariff has caused price levels to react positively. However, it is not easy to quantify the actual effect of the tariff or to determine what the effect should be.

The basic producer prices for wheat (grade 1) from 1995/96 to 1999/2000 are as follows:

Marketing

The wheat market has been deregulated since 1 November 1997 and wheat can be traded freely. The only government intervention in the market is the tariff on wheat imports. Greater risks and lower profit margins are realities of deregulated markets. Producers also have to contend with the world wide overproduction of wheat.

The Wheat Forum, representing the directly affected groups in the winter cereal industry, was established before the deregulation process started. In April 2000, the Winter Cereal Research and Development Trust and the Winter Cereal General Trust were merged to form the Winter Grain Trust. During 1998, statutory levies were implemented, namely R4,56/ton on winter cereal to finance research and 57c/ton to finance information. The information function has been taken over by SAGIS.

Barley

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