Southern Cape barley producers are threatening to divert their malting barley to other markets due to poor prices realised for this commodity. Leon Groenewald, a farmer from Riviersonderend and chairperson of the Barley Industry Committee, said the unhappiness is rooted in the fact that SAB prices for barley have remained around 800/t while international malting barley and wheat prices have increased substantially.
However Janine van Stolk, communications manager of SAB, claimed that barley producers were still receiving much more than the average wheat price per ton this year. She pointed out that the price for wheat was around R1 830/t, and the derived barley price of 695/t was negotiated in July. This price did not include a net premium agreed upon last year between SAB and barley industry representatives of R175/t, or a “gain share agreement” that adds another R159/t. “If you add all this up, including a price increase of R100/t given by SAB on 4 September this year, the total before deductions is actually R2 480/t,” Van Stolk said.
Many farmers feel that SAB is operating as a monopoly and have decided to significantly reduce or no longer plant malting barley. Groenewald estimated that farmers would redirect almost 40 000t of malting barley to the feed market in an attempt to boycott SAB. “SAB buys around 200 000t of South African malting barley annually, of which around 140 000t are sourced in the Southern Cape. Farmers are, however, so dissatisfied with the way the company is operating that they would rather use the malting barley as animal feed,” Groenewald explained.
Farmers are ‘not dependent on barley’
Farmers are also planning to replace malting barley with feed barley – which is much easier to grow and has less stringent quality protocols – canola, lupins, oats and more wheat. “We are not dependent on barley. There are numerous other crops we can produce with much more favourable prices and benefits for follow-up crops. Oats currently sells for R2 100/t and canola for around R3 100/t,” Groenewald said. He added that there were various new canola cultivars on the market that promised higher yields and were better adapted to South Africa’s production conditions. Canola and lupins also offer huge benefits in rotation systems and have a beneficial impact on follow-up wheat yields. Groenewald also claimed that SAB was currently importing barley for almost R3 200/t. Van Stolk acknowledged the current market price for barley was around 000/t and that this would probably be the amount SAB would have to pay to replace the local deficit if local producers decided not to deliver. However, she pointed out that unlike the local crop, imported barley is purchased almost a year in advance. “SAB signed contracts for barley last year at R1 800/t and that is what we are currently paying for imported barley this year.”
Dissatisfaction has also been expressed with the pricing mechanism used by SAB to determine malting barley prices. “We want a similar system to the one used for canola, where a minimum price is set. The SA Futures Exchange (Safex) price for wheat can be used as a reference system, but the price should then be proportionately higher than the wheat price and not lower, because malting barley production has higher risks than wheat production,” Groenewald said. He pointed out that listing malting barley on Safex would not work, as there was only one buyer. Van Stolk however pointed out that all role-players agreed that the price mechanism needed to change and should include a free market element in the equation as far as possible. She felt the current unhappiness was not because of a “lack of sustainability” or a “lack of profitability”, but was driven “by a pricing opportunity as per world markets that the producers feel they are missing out on.” – Glenneis Erasmus
