Western Cape wheat producers have requested Grain SA to search for an effective system to replace the use of in calculating the transport differential. Using Randfontein as a trade centre creates the impression that all wheat is sent and milled at Randfontein, whereas in reality it is sent to a mill and not at all, said Swartland wheat farmer Hermanus Kitshoff at the recent Grain regional meeting in the Western Cape.
He said this means farmers often have to pay far more than what it actually costs to transport wheat. Kitshoff said this system can be exploited to the advantage of millers, as they are able to negotiate at which silos grain should be delivered. Besides allowing them to know the price, the system holds no advantage to farmers, he said. A possible solution to this problem would be for farmers to trade wheat at a mill-door price. “Transportation costs are a function of the market, and it is greatly influenced by distance from the market as well as whether there are freights when the vehicles return.
By making use of a mill-door price, farmers would be able to negotiate better transport prices than the Randfontein price for their wheat,” Kitshoff said. H e also suggested Randfontein be replaced as a trade point by the country’s harbours, because this is where wheat is either imported or exported; that the mill centre be seen as the delivery point because this is where it ends up; and that grain storage points such as silos or farm depots be seen as storage points from which grain is transported.
Russel du Preez from grain-trading company Grain Vest said he believes the market is sufficiently mature to do without the transport differentials. od Blondin, manager of the agricultural products division of the JSE, warned a thorough investigation should be launched to ensure any new system is better than the existing one before it is implemented. e noted last year’s survey which found that most market players felt the use of as the trading centre was working effectively, but said the JSE is continually looking at ways to address the situation to provide farmers with an effective hedging mechanism. – Glenneis Erasmus