David Gleason
18 April 2005
column
Johannesburg — IT IS not for nothing that wheat, the world's most widely grown crop, is known as the staff of life. Many of the products we eat are derived from wheat, in its commonest form on the domestic table as bread.
It also explains why, when wheat's price rises disproportionately, its effect is felt all the way from farmers, through millers and manufacturers of many thousands of products to the end consumer. The price of bread is no laughing matter - it has been known to provoke social discontent to the point of revolution.
In the past few weeks, a carefully constructed campaign masterminded by Grain SA, a farmers' association, has been unfolding. At its heart it seeks to persuade government to impose tariff barriers on imported wheat - and it looks very much as though it is succeeding.
The trade and industry department's International Trade Administration Commission (another name for the old Board of Tariffs and Trade) announced some time ago through the Government Gazette that it was inviting submissions on the advisability of imposing an increase in grain import tariffs.
The time limit for this expired 10 days ago, and it is intriguing to see that the campaign launched by farmers against millers has stepped up since then.
It is hardly news that local farmers are, by and large, inefficient, or that they were mollycoddled extravagantly by the previous regime, which sought to buy their votes. The yield of wheat obtained per hectare in this country is 26% lower than the world average. The yield from maize is two-and-a-half times lower than in the US.
This country is now burdened with a massive oversupply of maize, yet produces only 50% of its wheat requirements. But there are huge acreages available, especially in eastern Free State, the largest wheat-producing region, which could easily be turned to over to wheat. If one of the country's objectives is to achieve food security, this will not be attained through bad farming practices.
Grain SA says its farmers cannot make a living from wheat at R1350 a ton - but that they can at R1700 a ton. In effect, therefore, it seeks the imposition of a form of protection which will be triggered if the rand price of imported wheat falls below a certain level. In other words, an artificial form of import-pricing parity which, if it was introduced, would enable farmers to go on buying their new Mercedes-Benzes every year.
Members of Grain SA may not - and I accept this is a generalisation - be that efficient at growing crops or at making the best use of the derivative and hedging instruments available to them through the futures exchange but, hell, they are smart when it comes to their income statements and their PR. They are busy telling everyone that it is the bakers that are responsible for this impasse. Bakers, they say, must absorb the 30c extra on every loaf of bread the new tariff barrier will introduce.
Well, the world doesn't work that way. The extra cost will indeed be passed on eventually, and it will have to be borne by everyone, including the nearly 60% of the population who live on less than R800 a month.
Curiously, in all this, the National Chamber of Milling supports the farmers. The only dissenting voice within it so far has been Fabcos-controlled Premier Foods - which probably means it will be kicked out of membership of that august body.
Premier Foods CE Ian Visser says the effort being made by Grain SA to underpin the price of wheat paid to local farmers has "nothing to do with subsidised imports but rather seeks to protect local industry against the falling international prices of wheat and a strong rand".
"It is the same," he says, "as asking government, and therefore the taxpayer, to protect mines against low gold prices and a strong currency."
And he has support from his chairman, Mxolisi Zwane, who says the company has pledged to absorb any increase in tariffs for the next six months. This may be noble, but it also does precisely what Grain SA wants millers and bakers to do.
In any event, this throws up another dimension, which comes in the form of a major black-controlled miller standing up against a predominantly white-controlled and critical production sector.
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