JSE Ltd. (JSE), which manages South Africa’s agricultural futures exchange, said it may stop deducting transport costs from every metric ton of wheat sold by farmers in the nation’s biggest region for the grain.
The location differential is applied to contracts to show the cost of moving stock from any one of 198 registered silos to Randfontein in the Gauteng province, the point from which the amount to be subtracted is calculated. This will rise 33 percent to 560 rand ($57) a ton from Oct. 1, when the new season starts, for farmers in the Western Cape, where 46 percent of wheat is grown. Grain South Africa, the biggest farmers’ body, said the increase would curb profit and output.
“Grain South Africa are busy working on a proposal and we are also consulting various players, leading up to something we want to put out to our advisory committee which meets on Oct. 17,” Chris Sturgess, commodities derivatives director at the JSE, said on Sept. 13 in Johannesburg. “The key question is: Do we do away with differentials for the Western Cape or not? Or, what are the other alternatives? At the moment there are lots of consultations ongoing.”
South Africa is a net importer of wheat and sub-Saharan Africa’s largest producer of the grain after Ethiopia, as well as the region’s biggest importer after Nigeria and Sudan, according to U.S. Department of Agriculture data.
In April last year, Grain South Africa, which represents about 7,000 farmers, said the JSE should stop using the differential and allow the market to find its own transport-pricing levels.
South African wheat for delivery in December, the most active contract, declined for a fourth day, losing 0.4 percent to 3,345 rand a ton, the lowest since Aug. 19, by the midday close in Johannesburg.
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