PGP warns that market structures are reinforcing barriers facing emerging and established commercial black producers
Phahama Grain Phakama NPC (PGP) has expressed deep disappointment after Grain SA’s application for urgent interim protection against the Johannesburg Stock Exchange’s new soybean pricing methodology was struck from the roll for lack of urgency. PGP warns that small and emerging black soybean farmers remain exposed to pricing practices that threaten their profitability and undermine efforts to build sustainable black-owned farming businesses.
This important matter will now be relegated to a lengthy legal process, opposed by powerful role players, while small and emerging black soybean farmers continue to carry a disproportionate burden. They must plant, source financing, harvest and market their crops, only to face an unyielding and inefficient pricing regime when attempting to bring their product to market.
Small farmers have the least power in the market, and the least capacity to absorb deductions that reduce the prices they receive. PGP’s concern is that published deductions in the futures market are used as standard deductions in the physical market, even when they do not reflect actual transport costs or local supply and demand. Many smaller producers have limited access to the hedging tools available in the futures market, yet their selling prices are influenced by its pricing structures.
Many black grain farmers operate in remote rural areas, including the former homeland areas of the Eastern Cape, KwaZulu-Natal, Mpumalanga and other developing regions. They often farm far from major commercial centres and face fewer commercial buyers, limited storage options and substantially less bargaining power. PGP argues that local supply shortages could justify premiums for farmers in some of these areas. Instead, farmers bear the full brunt of an area differential calculated against a single reference point in Gauteng, even where their crops are bought and processed locally. This is precisely where the single reference point differential will have its greatest impact.
For a large commercial participant, an unfavourable market signal may be managed through scale, storage, logistics, financial instruments or alternative buyers. A small commercial farmer operating hundreds of kilometres from alternative markets often lacks the scale, storage capacity or financial cashflow needed to negotiate better terms. PGP is concerned that the full soybean transport differential to Driefontein may be deducted from the price offered to that farmer, regardless of whether the crop is processed and consumed much closer to where it was produced. The farmer may have virtually no bargaining power to resist the standard deduction published by the JSE.
Grain SA and PGP’s calculations indicate potential producer income exposure of approximately R800 million per season from the disputed methodology, with producers in outlying areas potentially bearing some of the harshest consequences. For a developing commercial farmer, a reduction in income can determine whether a production loan is repaid, whether finance is available for the next season and, ultimately, whether that farmer remains in commercial agriculture. This given margins already under constrain due to large increases in inputs costs.
PGP invests substantial effort and resources in supporting black farmers on their path to sustainable commercial production. These efforts form part of South Africa’s broader agricultural transformation agenda. But providing land, training, finance and production support is not enough if those farmers enter markets in which they have insufficient power to negotiate a fair price. PGP believes that using published JSE deductions as an industry standard, without adequately accounting for physical market conditions, risk undermining the very businesses that farmer development programmes are working to build. Fair market access must therefore be central to agricultural transformation.
PGP is deeply concerned that neither the JSE’s approach to implementation nor the outcome of the urgent court process has provided meaningful interim protection to small and emerging producers, who have the least market power and the least capacity to absorb the financial consequences.
“Our farmers feel powerless. They do not have the balance sheets, logistics networks, storage capacity or negotiating strength to counter the inefficiencies in these market structures. Yet they are expected to carry the consequences while institutions with considerably greater resources defend the system,” said PGP Chairperson Jeremia Mathebula.
“I am particularly disappointed that the urgency of this situation, as experienced by the small farmer, has not resulted in interim protection. We respect the independence of our judicial institutions, but the practical plight of vulnerable producers has not been given sufficient weight. Production loans must be repaid, and the next season must be financed while this dispute continues.”
PGP calls for farmers’ voices to shape market decisions
PGP believes South Africa must confront a wider problem: when a small farmer challenges a powerful institution like the JSE, the contest is inherently unequal.
Large institutions have access to specialist advisers, sophisticated market information, legal resources and the financial ability to endure prolonged disputes. An individual emerging farmer generally has fewer resources. This is precisely why PGP represents black grain farmers collectively and works alongside Grain SA to ensure that their voices are heard, and their experiences and concerns inform decisions affecting their livelihoods.
“PGP will not walk away from this fight,” Mathebula said. “We will continue standing up for the small farmer, the emerging farmer and the established black commercial farmer. These producers are working to build businesses, create jobs and contribute to South Africa’s food security. We believe the JSE’s approach is unfair and places a particularly heavy burden on farmers who are already vulnerable. They deserve transparent, fair and effective markets that reflect the realities of the physical market and give them a genuine opportunity to compete.”
“We are not asking for preferential treatment. We are asking for fair market access and a system that recognises the realities under which smaller producers operate.”
PGP calls on the JSE, government, competition authorities, the agricultural value chain and other responsible institutions to consider not only whether market rules are technically defensible, but who ultimately bears the economic realities, and what those consequences mean for the livelihoods and long-term sustainability of small rural farming businesses.
For PGP, supporting black farmers means helping them produce successfully and ensuring that they have a fair opportunity to earn a sustainable income from what they grow.
ENDS
Media enquiries:
Jeremia Mathebula, Grain SA Vice Chairperson, 082 353 2726 | jeremiamathebula5@gmail.com
Technical enquiries:
Dirk Strydom, NAMPO Managing Director, 082 852 4810 | dirks@grainsa.co.za
