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THE
GRAIN AND OILSEED INDUSTRY
OF SOUTH AFRICA – A JOURNEY THROUGH TIME
ႃႄ
On 31 December 2015 the following contracts were traded on Safex:
Contract
Date listed
White maize WM1
March 1996
White maize WM2
July 2000
Yellow maize YM1
March 1996
Yellow maize YM2
July 2000
Wheat
November 1997
Sunflower
February 1999
Soy
April 2002
Transport differential
The transport differential introduced with the establishment of Safex reflects the
transport costs component that is taken into account in pricing. It represents the
transport costs for transporting grain from different localities to Randfontein.
Safex used Randfontein as the point of reference for determining the transport
differential because of the large volumes of grain that were processed there. The
transport differential for each Safex point of delivery was then calculated with the
transport component as basis and deducted from the Safex price to determine a
basis price at each silo.
Initially the transport differential was calculated mainly with respect to the cost
of rail transport, as most of the grain was transported by rail. Rail transport was
cheaper than road transport, so that as the volumes of grain transported by road
increased, the cost component was increased accordingly. Likewise, the increase
in the price of diesel as well as the higher maintenance costs of trucks due to the
poor condition of roads in time led to a higher transport differential.
Infrastructure
After the deregulation of the markets in 1996 and the accompanying changes in
production volumes in certain isolated and marginal areas, several of the silos and
rail infrastructure established in the period of controlled marketing basically fell
into disuse, while a greater concentration of storage developed in other areas.
With deregulation the storage capacity was virtually totally under the control of
the former agricultural co-operatives. Allegations were made that the storage
facilities abused their dominance with respect to storage capacity to apply un-
competitive practices. One of the biggest storage facilities of maize at the time,
Senwes, was in fact accused by the Competition Commission that they had
abused their dominant position in the provision of storage capacity. With the
introduction of alternative storage facilities after deregulation, e.g. silo bags and
grain dams, traders had other options than just the concrete silos of the former co-
operatives and the silo owner would probably no longer find it easy to dominate
the market for storage.
Agribusinesses
One of the biggest adjustments for producers shortly after deregulation was the
change in their relationship with agribusinesses. Since the start of controlled market-
ing in South Africa in the 1930s agricultural co-operatives played a very important
role in the grain industry. The co-operatives, which were owned and controlled by
producers, functioned as agents of the control boards, which were the only legal
marketers of grain. Grain producers conducted all their grain business through the
agribusinesses (co-operatives). The producers therefore focused on production,
while the control boards marketed their products.
However, with the commencement of the 1996 Act the position changed com-
pletely and producers had to manage the marketing of their products themselves.
The commencement of the 1996 Act and accompanying abolition of the market-
ing councils also meant that the role of agribusinesses as agents of the marketing