FOREIGN SUBSIDIES DISTORT MARKET
Wheat industry in distress as farmers switch to crops that bring in dough
The situation has deteriorated to such an extent that last season, more wheat was imported than produced locally
Local wheat production has been in decline since 2000 as farmers are dumping the crop in favour of more profitable produce such as maize and soya beans.
The situation has deteriorated to such an extent that last season, more wheat – about 1.8-million tonnes — was imported than produced locally. The final wheat crop in 2015-16 reached 1.4-million tonnes. Total wheat production in 2000 was 2.43-million tonnes.
Absa senior agricultural economist Wessel Lemmer says the wheat industry is in distress. He points to a declining trend in wheat-planted areas and too
little support from the government and industry.
"The problem with wheat is that it is difficult to produce profitably, which makes the industry vulnerable to imports. As soon as you have an industry that produces 50% and less of demand, the industry begins to lose its production capacity, and when farmers can’t produce profit, they divest," he says.
Some of the countries SA imports wheat from include the US, Argentina, Australia, Germany and Canada. The bulk of the imports are from Russia. Despite being a net importer, SA also exports to Botswana, Lesotho, Zimbabwe and other neighbouring countries.
Sensako director of research and development Francois Koekemoer says millers and bakers require high-quality wheat from local producers. However, this breed does not yield a high quantity of crop.
Sensako is primarily engaged in the breeding and commercialisation of agronomic crop seed. Its wheat-breeding team comprises 60% of the senior wheat breeders in SA.
Sensako wheat cultivars also account for about 80% of all wheat grown in the country.
"The millers and bakers can import cheaper quality wheat which they mix with the high-quality produced locally. This forces the wheat price down in SA. You can understand the frustration of the farmers who get a similar amount of money per tonne [for] their high-quality produce as the cheaper imported one," says Koekemoer.
Grain SA CEO Jannie de Villiers says the demand for wheat is growing along with the country’s population, with demand at about 3.2-million tonnes for the grain. Local supply, however, is decreasing.
Unlike maize and soya beans, which use genetically modified organisms and get better yields and need lower inputs, there is no such technology for wheat, De Villiers says.
"Added to this, wheat is heavily subsidised in exporting countries and research funding from the government in SA has decreased," he says.
An import tariff of R1,591.40 per tonne has been put in place in a bid to support the local wheat industry.
Independent agricultural economist Fanie Brink says the tariff aims to protect local producers against the unfair subsidisation of international wheat prices by exporting countries.
Koekemoer says maintaining the tariff will prevent the dumping of lower-quality wheat in SA. Furthermore, support for breeding programmes would benefit the industry as a whole.
"The industry needs to investigate the option of establishing a marketing channel for lower-quality wheat varieties with higher yield," says Koekemoer.
Absa’s Lemmer says the government could play an important role by appointing personnel to investigate the policy instruments of countries that hurt SA’s wheat industry.
The agriculture department needs to increase its investment in research.
"Is it fair that our producers compete with producers in Australia who enjoy government support to the full, but here they have to carry the burden themselves? The government needs to take up more responsibility in this matter. Thus, we need good policy support and government funding for prebreeding research, as it should be."