What’s going down the tubes?

Agri Africa Trust has in the past been forced to sell grain at a ‘take it or leave it’ price due to some silo companies mixing grain grades and thereby jeopardising the original security
certificate. Managing director Jaco de Villiers says the organisation has now committed itself to stop these grain ‘tricksters’ in their tracks.
Issue date: 23 February 2007

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Since its inception, Agri Africa Trust (AAT) has made it clear that it would leave no stone unturned in its quest for an explanation for the weakening financial position of the grain farmer.

AAT finances several tons of grain for which farmers provide silo certificates indicating the type, quality grade and quantity of grain, and its location as security. But when visiting silos at Hartbeesfontein, Protespan and Bultfontein, AAT found that no tubes existed for the grade indicated on the silo certificate for grain stored at these silos. As a result AAT was forced to sell grain to Senwes at a ‘take it or leave it’ price because the company’s head office prevented silo managers from making samples available.

The original buyer then opted out of the transaction. AAT has requested a forensic audit of grain quantities in South Africa in 2006, but to no avail. Now the question is whether substantial volumes of grain are being rolled on through the silo certificate system in the hope that the following harvest will be in early enough. Hopefully there will now be enough pressure for such an audit to get off the ground, as responding to our queries by referring to silo certificate rules is ridiculous.

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To enforce rules that allow grain tricksters to physically move grain to a location indicated on the certificate is just another sign of power abuse or deception within the grain trading environment.

 While it might be possible for powerful organisations to sift one grade of maize from another grade as they claim, we would like to know what happens to B1, B2 and B3 wheat in one tube. What happens in the case of wheat, where grading criteria differ from maize – how do you add or remove protein?

AAT is deeply concerned that a grading system is used to determine the price of a commodity and then this grading falls by the wayside when one grade is mixed with another in the silo. T he question arises as to why a grain grader would mix a low-grade grain with a higher grade, if it would be to his or her own detriment?

One has to wonder whether this mixing of grains doesn’t take place to influence the price to the silo owner’s benefit.  In 2006 AAT questioned the sudden introduction of alternative grades on the futures market. It would be pointless to debate the losses many farmers have consequently suffered. But it is noteworthy that in August 2006, Grade 2 white maize opened on Safex at R150/ton below 1 white maize – currently the difference is about R27/ton. Financiers have also used the ton figure as a basis for valuing the grain.

AAT challenges Safex to divulge what percentage of Grade 2 maize was traded of the total maize trade for the period in question, and to tell us under whose pressure they acted in opening this market. AAT also challenges Sagis to tell us how many tons of each grade of maize was harvested in 2006, and how much of those specific grades are still in silos in South Africa, considering that many silo owners don’t have silos marked for some of the grades delivered.

AAT also wants to know from silo owners if they are going to back-pay producers for the better position they (silo owners) now find themselves in. We also want to know from buyers and financiers if they are just going to sit and watch this grading manipulation taking place. Are buyers on the futures market going to continue buying silo certificates for which a dedicated tube doesn’t exist? AAT will exhaust every possible avenue to level the market playing field so that every grain producer can achieve and create wealth. |FW