SA wheat farmers seek incentives

Johannesburg - Investment in South Africa's wheat industry has slowed as farmers abandon the cereal in favour of other grains on the back of low prices and "unfair market competition," an industry official said on Monday.

Kobus Laubscher, chief executive officer of farmers' group Grain SA, said weak demand in the aftermath of the global financial crisis has led to lower wheat prices, discouraging further investment in the sector.

South Africa's Crop Estimates Committee (CEC) in February lowered its estimate of the 2009 wheat crop to 1.92 million tonnes, compared with the 2.13 million tonnes output in the 2008 season.

The committee said last week South Africa - the continent's third largest wheat producer after Egypt and Morocco - intends to plant less hectares of the cereal this year.

"I think the problem lies with lack of profitability, the prices are currently too low to encourage producers to plant wheat, so if they have a choice between different grains they move away from wheat," Laubscher said in an interview.

Laubscher said South African farmers also faced "unfair market competition" from Germany, from where South Africa imports most of its wheat to meet the local demand.

"German wheat producers receive a subsidy from the government so the prices German producers get for their wheat is not market related...there is unfair competition for other farmers to compete on those kind of levels," said Laubscher.

According to the South Africa Grain Information Service (SAGIS), Africa's largest economy has since October last year imported 724 446 tonnes of wheat and has exported 179 881 tonnes.

"The subsidised wheat from Germany is cheaper than our own wheat so while we are a net importer, you find farmers exporting to other countries," said Laubscher.

He said Grain SA has applied for an increase in the price level local farmers are being assured in case of cheaper imports to $260 from $157 to be able to boost production.

"We have asked for an increase of that protection level to $260 per tonne, if the prices drop below the support level then there is a guarantee...of an internal price of $260 per tonne," Laubscher said, adding he expected a decision on that before the start of the next marketing season next month.

"We can produce wheat if we can be guarded against unfair competition."

- Reuters