South African wheat prices hit record high on import tariffs

South African wheat prices hit an all time high on Thursday as the market reacted to an expected 30 percent hike in import tariffs due to a weak rand and falling global prices.

Africa’s most industrialised economy is set to increase the tariff to 1,591.40 rand ($102.58) from 1,224.30 rand currently, according to a notice on the South African Grain Information Services website published on late on Wednesday.

The expected tariff hike is based on a formula using current world wheat prices and rand expectations.

The wheat contract for delivery in July reached a record high of 5,220 rand ($336.48) to close 0.58 percent up at 5,180 rand.

“It was the first day of trading after the announcement on SAGIS and that added on some pressures to the price,” Agricultural Business Chamber economist Wandile Sihlobo said.

South Africa imports about 60 percent of its annual wheat consumption with this figure likely to increase along with higher demand and falling domestic production.

“A high import tariff is also a double-edged sword, protecting farmers from unfair international competition on the one hand, but burdening consumers through increased prices on the other,” Sihlobo said in a report.

Chicago wheat prices, which are at near six-year lows, rose 1.5 pct on Thursday helped by potential damage to maturing U.S. winter wheat due to wet weather.

South Africa’s finance ministry in April approved a 34 percent increase in the tariff on wheat imports. The drought-hit country made its biggest purchase of U.S. wheat in nearly five years last week.

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Source: CNBC Africa