October 5, 2006

 

Wheat prices surge in South Africa, Rand decline

 

 

Wheat prices in South Africa surged as gains in other grain markets and a weakening rand boosted the cost of imports.

 

South Africa is a net importer of wheat notwithstanding the fact that its domestic production lags behind only Egypt and Morocco. With wheat prices surging 30 percent in Chicago this year, the South African Rand (ZAR) is trading at its weakest against the dollar in three years.

 

South Africa, which imports wheat from the US, Canada, Argentina, Germany and Ukraine practises import-parity pricing. Under this, the farmers charge local customers the same price for their wheat as it would cost to import the grain, including insurance and freight.

 

One trader pointed out they were playing catch up to the import parity prices.

 

Wheat meant to be delivered in December surged by its maximum limit of 45 ZAR or 2.5 percent, to 1,877 ZAR (US$235.95), a metric tonne on the South African Futures Exchange today.

 

Also, corn prices in South Africa, the biggest producer of the grain in Africa, rose for the first day in three as concern eased that planting for next season's crop would surge.

 

Traders reason this to a negative sentiment in the market.

 

For instance, white corn meant for December delivery period rose 21 ZAR, or 1.7 percent, to 1,225 ZAR a tonne. This would have a major impact as meal made from white corn constitutes the country's staple diet.

 

Prices of second-grade white corn advanced 19 ZAR, or 1.7 percent, to 1,147 ZAR a tonne while for yellow corn rose 14 ZAR, or 1.2 percent, to 1,226 ZAR a tonne. The latter is mainly used as animal feed.

 

The gains or losses for the most active contracts of the following crops stood as follows. All prices are in rand and the crops are sold in tonnes:

 

	Price as at Oct 5	Previous Close	% Change
Sunflowers	2,435	2,405	1.3
Soybeans	2,070	2,038	1.6