Following the international drop in the cost of wheat, Grain SA has risen to address the fear by the public about possible hike in cost of bread. Grain SA says the drop in price should rather reduce bread prices instead of increasing it.
Tracing the drastic fall of wheat to late last year, Grain SA CEO Jannie de Villiers said price fall in breads ought to have followed suit.
Bread prices were expected to rise at least 10% as a result of the 34% increase in the import duty on wheat announced by the Treasury on Friday.
The prices of wheat alongside other important crops like corn and Soya beans have so far this year 2016, risen and this was due to speculation of uncertain quality parameters exercised by Egypt—the top wheat importer.
De Villiers made his assertions in the wake of the National Treasury’s delayed announcement of a possible increase in import duty on wheat. The new duty was supposed to be announced in December.
De Villiers also noted that as increased wheat tariffs continues to loom, wheat importers, at this period are benefiting from the R313/ton tariff on 608 126 tons of wheat.
He added that once the import duty was announced, while it would “remove” the benefit the importers enjoyed, it should however, not affect the price of bread because the price of wheat is only 18 percent of the bread price.
Tariff hikes according to him, were sometimes used as an excuse to increase the price of bread but he said the tariff was meant for the benefit of local producers.
“This tariff protects the local wheat industry. If producers decide not to plant anymore, it would result in higher imports and losing more foreign exchange due to staple food imports,” said De Villiers.
“The view that the increase in the wheat import duty to be announced will increase the bread price by 10 percent, is not correct. It will also be a setback to the consumer if opportunistic behaviour results in an increase in the price of bread.”
Bread is a staple food for poor households already struggling against increases in the cost of food due to the extended drought, which has plagued the agricultural sector.
It is for this reason that the Treasury has been reluctant to grant Grain SA’s application for a wheat tariff increase, which it lodged with the International Trade Administration Commission in December.
It was the University of the Free State department of agricultural economics head Johan Willemse who estimated on Sunday that bread prices would rise by at least 10% due to the tariff hike.
He noted that SA imported about 60% of its wheat requirements and because of the drought, would have to import an estimated 2.2-million tonnes in the year to end October, with the local crop estimated to be about 1.5-million tonnes.