- Duty raised as global prices trade close to five-year low
- International price drops as record inventories seen in 2016
South Africa raised duties on wheat imports to the highest on record to protect local producers after U.S. prices of the grain dropped to the lowest in more than five years this month.
The nation increased the tariff by 78 percent to 911.20 rand ($66) a metric ton, the National Treasury said in a statement posted on the website of the South African Grain Information Service. That’s the highest since the government introduced the regime in January 2002, Nico Hawkins, general manager at Sagis, said by phone.
“An increase in the tariff would provide a base for domestic prices,” Wandile Sihlobo, an economist at the Grain SA farmers’ lobby, said by phone on Friday. “The tariff is a good increase given that South African producers right now are heading towards harvesting.”
Wheat is trading close to a five-year low in Chicago amid a global glut and as world inventories may climb to a record high in 2016 as farmers reap biggest crops in the U.S., Russia and Ukraine, the largest producers. In South Africa, farmers probably planted the second smallest area on record this year, substituting the grain for more-profitable, higher-yielding crops such as corn.
While South Africa is the sub-Saharan region’s biggest producer of the grain after Ethiopia, it’s still a net importer of wheat, according to the U.S. Department of Agriculture data.
The duties comprise the difference between a reference price of $294 a ton and a weekly price for hard red winter wheat, which averaged about $220 a ton in the week through Sept. 22, Hawkins said.
The rand has weakened 16 percent against the dollar this year, reaching a record 14.0813 on Sept. 24. Wheat climbed 0.4 percent to 4,139 rand a tone in Johannesburg on the South African Futures Exchange, extending the increase this year to 3.5 percent.