South Africa Wheat Gains to Record as Import Tariff Seen Rising

  • Wheat-import duty set to rise about 30% to highest on record
  • Duty protects farmers, but burdens consumers, Agbiz says

South African wheat climbed to a record as duties on imports of the cereal are set to advance by about 30 percent following a decline in global prices and a drop in the local currency.

Wheat for delivery in July rose as much as 1.4 percent to 5,220 rand ($336) a metric ton on the South African Futures Exchange in Johannesburg, the highest since trading started in 1997, and was at 5,180 rand by midday.

The tariff on wheat imports will probably increase to 1,591.40 rand a ton, from the current record 1,224. 31 rand, the Pretoria-based South African Grain Information Service in a statement on its website. The tariff has climbed more than sevenfold since October 2014, driven by the drop in international wheat prices, which are close to a six-year low, and by weakness in the rand, which had declined 22 percent against the dollar over the past year.

“A high import tariff is also a double-edged sword, protecting farmers from unfair international competition on the one hand, but burdening consumers through increased prices on the other,” Agricultural Business Chamber economists Wandile Sihlobo and Tinashe Kapuya said in an e-mailed report.

The weak rand and the worst drought in more than a century induced by an El Nino weather phenomenon boosted South African food costs and threaten to keep inflation outside the central bank’s 3 percent to 6 percent target range for an extended period. There are indications that the pass-through from the exchange rate to inflation is increasing and food-price growth is forecast to climb to about 12 percent in the third quarter of this year, the central bank said last week.

Duty Calculation

While South Africa is the sub-Saharan region’s biggest producer of the wheat after Ethiopia, it’s still a net importer of the grain, according to the U.S. Department of Agriculture data.

The current wheat-import duty was approved in April by the nation’s Finance Ministry, which at the same time proposed to Trade and Industry Minister Rob Davies that he considers “an urgent and accelerated review” of the formula used to work it out. The tariff is based on calculations using a formula created by the country’s International Trade Administration Commission

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