Agriculture industry organisation Grain SA says South Africa’s slow response to rapidly changing global trade conditions is placing local grain producers under growing financial pressure.

The prolonged delay in finalising the wheat tariff review has become a critical concern for the local grain industry, particularly as South African wheat producers continue to compete against heavily subsidised producers in major wheat-producing countries across the world, it says.

The application to amend the current tariff-based reference price and automate the prolonged tariff publication process was submitted in June 2024, it points out.

The application to the International Trade Administration Commission of South Africa (Itac) was made by Grain SA and growers' association South African Cereals and Oilseeds Trade Association (Sacota).

The application requested an increase in the domestic dollar-based reference price for wheat, as well as improvements to the implementation methodology of wheat import tariffs to ensure more responsive and transparent adjustments.

South African producers do not compete on an equal footing in global markets, with many international wheat industries receiving significant government support, subsidies and protection measures that local producers simply do not have access to, Grain SA says.

The wheat tariff mechanism remains one of the only available tools to protect South African wheat producers against distorted global market conditions and unfairly subsidised imports, making an effective and responsive tariff system critical for the sustainability of the local wheat industry, it adds.

The tariff system is about ensuring South African producers are not forced to compete against heavily-subsidised imports without any effective local mechanism to offset those distortions, says Grain SA chairperson Richard Krige.

Global trade dynamics are no longer abstract policy discussions for South African agriculture, but are directly affecting producer profitability, planting decisions, local production sustainability, long-term food security and the competitiveness of domestic grain production.

“We need a tariff system that works for producers in real-time and responds effectively to rapidly changing global market conditions. Producers cannot absorb endless delays while competing against countries that actively support and protect their agricultural sectors,” he says.

South African grain producers are expected to compete globally, but often have to do so without the policy responsiveness and trade certainty available to producers in competing countries.

The existing tariff system no longer adequately protects local producers against heavily subsidised imports and volatile international market conditions, while delays in tariff implementation undermine the effectiveness of the mechanism itself.

The industry is still awaiting final implementation of the requested tariff increase almost two years after its application to Itac.

Since the application, global wheat prices have declined further, while South African producers continue to face escalating input costs, infrastructure challenges, logistics pressures and ongoing uncertainty around trade policy implementation.

Grain SA recently warned that many local wheat producers are already operating below sustainable levels, Krige notes.

“Every month of delay matters. Producers are making production and investment decisions in one of the most volatile global trade environments in years, yet the industry is still waiting for the outcome of a tariff application submitted almost two years ago.

“Policy delays in highly volatile markets have real economic consequences.”

Grain SA advocates for a fair, predictable and rules-based trade regime that recognises and supports the strategic importance of maintaining domestic food production capacity in the face of the realities of international agricultural support practices.

South Africa’s wheat tariff system is specifically designed to offset distortions created by subsidised international production and abnormal market conditions, rather than artificially inflating food prices, says Krige.

Historical industry analysis has consistently shown that the producer wheat price contributes only a relatively small portion to the final retail price of bread, while the broader economic value of sustaining local wheat production extends throughout rural economies and agricultural value chains, he adds.

Further, increasing geopolitical tensions, export restrictions, regional conflicts and supply chain disruptions continue to reinforce the importance of maintaining local agricultural production capacity and reducing vulnerability to external shocks.

“If South Africa wants resilient agricultural value chains, sustainable rural economies and long-term food security, then producer profitability and policy certainty cannot become secondary considerations,” says Krige.

“Countries across the world are actively positioning and protecting strategic agricultural sectors. South Africa must decide whether it wants to shape its own agricultural trade future, or continue reacting to forces beyond its control.”