In an interview with Business Report Chief Commissioner, International Trade Administration Commission of South Africa (ITAC) Chief Commissioner Ayabonga Cawe, explained the commission's recommendation to leave the Dollar-Based Reference Price (DBRP) for wheat unchanged at $279 (about R4,558
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The International Trade Administration Commission of South Africa (ITAC) has defended its decision to keep the Dollar-Based Reference Price (DBRP) for wheat unchanged at $279 (about R4,558) per ton, arguing that current farm-gate prices are sufficient to cover producers' costs while continuing to shield the industry from unfairly subsidised imports.
ITAC chief commissioner Ayabonga Cawe told Business Report on Friday that the commission's recommendation was guided by the fundamental purpose of the DBRP, which is to protect South African wheat farmers against distortions caused by heavily subsidised global wheat production.
“The function of that is to provide effective cover against distortion from subsidies in the world market. Such cultural products can have a depressing effect on imported prices of the globally produced commodity,” he said.
“It's produced in certain parts of the world where it's subject to significant subsidies for planting. And that artificially suppresses prices where there is oversupply.”
This comes after Grain SA and the South African Cereals and Oilseeds Trade Association (Sacota) had applied in 2024 for the DBRP to be increased from $279 to $289 per tonne.
However, ITAC concluded that such an increase was not justified after analysing industry data over a five-year period.
Grain SA on Thursday formally requested the full report and reasoning on which the Government Gazette announcement was based as it had not yet received direct official communication from ITAC.
Grain SA said it was not asking for protection from competition or a guaranteed profit, but was merely asking for "a fair, predictable and evidence-based environment in which South African producers can compete and continue producing wheat for the country".
Meanwhile, Cawe said the commission compared average production costs between 2020 and 2025 with prevailing farm-gate wheat prices and found that producers were able to recover their costs while still earning a margin.
“When we looked at those five-year average prices in 2020 and 2025, it's quite clear to us, based on the information sent inside the industry, that those average production costs, when compared to farm gate prices for wheat, effectively cover those costs and leave some margin,” he said.
According to Cawe, this conclusion applied across South Africa's major wheat-growing regions, including both dryland and irrigated farming areas in the Eastern Free State and the Southern Cape.
“Across all of those growing regions, there is a sense that farm gate prices allow for cost recovery and some change in relation to a margin at different levels, and that particular evidentiary picture on the bank indicated to us that there would be no need to shift the price floor higher than its current.”
Cawe also noted that South Africa has remained a net importer of wheat since the early 1990s, meaning the country continues to rely on imports to meet domestic demand.
“Even all of the reviews that ITAC has done since the 2000s have unfolded in a context where the African wheat and flour industry imports a sizable share of its requirements for both processing and other uses, and so the view that the runaway set of imports.”
He rejected concerns that a flood of cheap wheat imports threatened local producers, noting that international wheat prices had in fact been rising following geopolitical tensions in the Middle East and the temporary disruption of shipping through the Strait of Hormuz.
“Prices of wheat are tracking upwards. However, there isn't even a risk that there is a deluge or a flood of cheaply priced imports that will miraculously land in South Africa.”
He said that increases in fertiliser input costs, including granular urea and ammonia, were affecting agricultural producers globally rather than South African farmers alone.
Addressing criticism that rising fertiliser costs should have been factored into the decision, Cawe said those developments occurred after ITAC had completed its investigation.
“How would we have known when we undertook the investigation? We finalised the work, and a few weeks later, you've got the conflict at the Strait of Hormuz. So I'm not sure what the idea is to try and say you could have foreseen miraculously that you would have these kinds of crossfights on the production side.”
“Anyone who plans to eat, make use of the fertilizer is similarly or maybe asymmetrically exposed to the same price policy. The $279 remains, so there is still protection for the industry, and we feel this was a fair decision.”
BUSINESS REPORT