WHEAT

MARKET VALUE CHAIN PROFILE 2010-2011

1.

DESCRIPTION OF THE INDUSTRY

Wheat is the second most important grain crop produced in South Africa. Most of wheat produced in South Africa is bread wheat, with small quantities of durum wheat being produced in certain areas and is used to produce pasta. In South Africa, wheat is mainly used for human consumption (bread, biscuits, breakfast cereals, rusks, etc) and the remaining is used as seed and animal feed. There are other non-food uses such as production of alcohol for ethanol, absorbing agents for disposable diapers, adhesives and industrial uses as starch on coatings. Producers of wheat are estimated to be approximately between 3 800 to 4000.

Figure 1: Wheat: Gross Value of Production

20000000 18000000 16000000 14000000 12000000 10000000 8000000 6000000 4000000 2000000 0
20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09

R 000

Years
Source: Agricultural Statistics

The contribution of the wheat industry to the gross value of agricultural production as shown in Figure 1 above remained below 4 million rands between the years 2000 and 2003 until a peak was attained in 2004. There has been a substantial decline in the industrys contribution to the gross value during 2003 mainly due to unfavorable weather conditions that resulted in decreased crop yields domestically. The wheat industrys contribution to the gross value of agricultural production increased dramatically during the year 2004 contributing more than 18 million rands but dropped again to levels experienced before 2004 when this industry experienced a surge in imports between 2005 and 2009.

1.1

PRODUCTION AREAS
Wheat is planted between mid April and mid June in the winter rainfall areas and between mid May and end of July in the summer rainfall areas. It is produced throughout South Africa with the Western Cape, Northern Cape and Free State provinces being the largest producers accounting for 82% of total wheat production during the 2009 season as shown in Figure 2. Approximately 20% of the total area planted to wheat is cultivated under irrigation and 80% under dry land conditions.

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Figure 2: Wheat production by provinces 2009

Mpumalanga 2% Limpopo 5% Kwazulu Natal 2% Gauteng 1% North West 7%

Western Cape 36%

Free State 32% Northern Cape 14%

Western Cape Limpopo Eastern Cape Mpumalanga Northern Cape Gauteng Free State North West

Eastern Cape 1%

Kw azulu Natal

Source: Agricultural Statistics

Smaller quantities of wheat are also produced in other provinces such as Kwazulu-Natal, Eastern Cape, Mpumalanga and Limpopo. Wheat in South Africa is produced mainly for human consumption, although small quantities of poorer quality wheat are marketed as stock feed. Approximately 60 percent of the total quantity of wheat flour and meal is used for the production of bread. Table 1: Wheat production by provinces PROVINCE Western Cape Eastern Cape Northern Cape Free State KwazuluNatal Limpopo Gauteng North West Production (tons) 2004 520 000 14 000 300 000 510 000 34 000 63 000 14 000 145 000 Production (tons) 2005 645 000 14 000 306 000 580 000 42 000 50 000 92 000 14 000 162 000 Production Production Production (tons) (tons) (tons) 2006 2007 2008 730 000 8 000 250 000 780 000 31 000 81 000 77 000 10 000 138 000 813 000 15 000 260 000 484 000 29 000 58 000 26 000 10 000 117 000 823 000 22 000 315 000 532 000 35 000 110 000 42 000 12 000 131 000 Production (tons) 2009 701 000 20 000 277 000 623 000 35 000 99 000 41 000 13 000 137 000

Mpumalanga 80 000

Source: Agricultural Statistics

Table 1 indicates that wheat is produced in all the nine provinces of the republic with the Western Cape Province being the major producer during the past six years. Greater quantities of wheat are

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also produced in the Free State and Northern Cape Provinces. The quantity of wheat produced in the Western Cape Province has shown a continuous increase between the years 2004 and 2008 while the Northern Cape Province has experienced a slight decline in the volumes of wheat produced between 2006 and 2007. The volumes of wheat produced in the Free State Province have experienced fluctuations while the North West province has declined substantially between 2006 and 2007, followed by an increase in 2009.

1.2

PRODUCTION TRENDS
Figure 3: Area Planted to Wheat and Total Production
1200 1000 3000 2500 2000 1500 1000 500 0

Area Planted (1000 ha)

800 600 400 200 0

20 02

20 03

20 04

20 05

20 06

20 07

20 08

20 00

20 01

Years Area Planted (1000 ha) Total Production (1000 tons)

Source: Agricultural Statistics

According to FAO, South Africa is the largest producer of wheat in the SADC region and the fourth largest producer on the African continent. Globally, South Africa is ranked number 37 in terms of wheat production, with China being the worlds leader in production. Areas planted to wheat in South Africa have been relatively stable at an average of 800 000 hectares as from 2000 to 2005 as can be seen from Figure 3 above. The area planted to wheat declined significantly during 2007 leading to a decrease in production volumes during the same period. The area planted increased from 2000 until 2002 and this led to a massive increase in production volumes over the same period. However, wheat production showed a decline during the year 2003 due to unfavorable climatic conditions in the country that resulted in lower crop yields and this was followed by slight increases in production volumes from 2004 until 2006. Both production volume and area planted to wheat declined substantially during the 2007 year in spite of increasing producer prices. The wheat production volumes increased slightly in 2008 followed by a decline during the year 2009.

1.3

EMPLOYMENT
Wheat farmers provide work opportunities to about 28 000 people. From 1992 to 1998 employment has decreased by 25% in the milling industry as a result of improved efficiency and some milling units being closed. The new small entrants into the market are creating new employment opportunities, but on a low basis and not fast enough to counter the negative impacts of the losses at the large mills. The total capital investment in the milling industry is approximately R3 billion and it is estimated to employ around 3 800 people.

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20 09

Total Production (1000 tons)

2.
2.1

MARKET STRUCTURE
DOMESTIC MARKET
The major product of the baking industry is bread and 70 to 80 percent of all wheat flour produced is used for bread baking. The industry is a second major supplier of energy in the national diet after maize meal. Annual consumer expenditure on bread was estimated at R6 700 million in 2000 compared to an expenditure of R6 200 million for maize products. National bread consumption is estimated at 2 800 million loaves per annum or approximately 62 loaves per person per annum. There are, however, considerable differences between the provinces in terms of total consumption and preference for white or brown bread. For example, the per capita consumption in Gauteng is 86 loaves per annum compared to 44 loaves in Limpopo. In the Western Cape 76% of all bread eaten is white bread. In Limpopo however, 25% of the bread eaten is white while the balance is brown bread.

Figure 4: Total Wheat Production vs Consumption

3500 3000 2500

1000 tons

2000 1500 1000 500 0

06

07

01

02

03

04

00

05

08 20

20

20

20

20

20

20

Years

Production (1000 tons)

Source: Agricultural Statistics

20

Consumption (1000 tons)

Figure 4 indicates that the total annual production of wheat is generally less than the domestic consumption requirements. Between 2000 and 2002 marketing year (except the year 2001) there has been a shortage of wheat in the country, which had to be met by imports from other countries. In 2003 the production volume was at the lowest level which created a considerable deficit at that time. This situation intensified even further between the years 2003 and 2009 when a substantial decrease in wheat production occurred relative to the domestic consumption requirements. The consumption of wheat as shown by Figure 4 has been experiencing continual marginal increases between 2003 and 2009 while the production quantities fluctuated considerably.

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20

09

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Figure 5: Average Wheat Producer Prices

3000 2500 2000 1500 1000 500 0

Rands/Ton

20 05

20 06

20 07

20 08

20 00

20 01

20 03

20 02

Source: Agricultural Statistics

Wheat producer prices experienced a steady increase between the period 2000 and 2002 in response to a steady increase in the demand for wheat and wheat products. From 2003 producer prices declined until the lowest level was attained in 2005 owing to unfavorable weather conditions that prevailed during 2003 and necessitated a reduction in areas planted to wheat and consequently production. Producer prices recovered again and increased substantially between 2006 and 2007 when domestic demand also experienced a sharp increase. The average producer prices for wheat experienced a marginal decline below R2 500/ton during 2008 and declined further in 2009 to about R1 600/ton.

2.2

WHEAT ExPORTS
South African wheat flour exports into the SACU and the SADC regions have shown a slow increase, particularly from the year 2000, due to low priced imported flour from the West and East either in the form of subsidized imports or donations. This situation was further aggravated by wheat imported from outside the SACU region subject to a rebate on import duty. Figure 6 indicates that South Africa was not competitive in exporting wheat between the years 2001 and 2007. During this period South Africa exported more wheat and wheat products for less.

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20 04

Period (Years)

20 09

Figure 6: Wheat Exports

300000 250000 200000 150000 100000 50000 0 1200000000 1000000000 800000000 600000000 400000000 200000000 0

Quantity of Exports (Tons)

20 04

20 05

20 00

20 01

20 02

20 03

20 06

20 07

20 08

Marketing Years
Exports (tons) Value of Exports (Rands)

Source: Quantec Easy Data

Wheat exports from South Africa to the rest of the world fluctuated considerably over the period under analysis. The period under review opened with relatively higher wheat exports, especially in 2000 and 2001. The exports declined dramatically between the years 2002 and 2006 mainly as a result of declining levels of local production and increasing local consumption of wheat products. During the same period greater volumes of wheat and wheat products were exported at lower values. The value of wheat exports regained during 2008 when about 150 thousand tons of wheat were exported to the world at higher values. South Africas wheat flour exports are mainly to SACU and SADC countries such as the Democratic Republic of Congo, Malawi, Zambia, Zimbabwe, Angola and Mozambique. The greatest share of South Africas wheat flour exports are to Democratic Republic of Congo, Malawi and Zimbabwe.

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Value of Exports (Rands)

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Figure 7: Value of wheat exports by province

1200000000
Exports Value (Rands)

1000000000 800000000 600000000 400000000 200000000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Period (years)

Western Cape Source: Quantec Easy data Gauteng

Free State Mpumalanga

Kwazulu-Natal Limpopo

North West

Exports of wheat are mainly from the Gauteng, Kwazulu-Natal and Western Cape Provinces; with the Gauteng Province commanding the greatest share in the value of wheat exports between 2000 and 2009. The value of wheat exports from the Gauteng Province increased steadily between 2000 and 2001. Wheat export values from the Gauteng Province then experienced a drastic decline until 2006. On average the value of wheat exports from the other three provinces have been below 100 million rands during the entire period under review. Exporters who are mainly situated in the Gauteng Province source out wheat from the major wheat producing provinces such as the Western Cape, Northern Cape and the Free State provinces. Furthermore, the presence of the Randfontein grain market also accounts for the greatest share in Gautengs wheat exports.

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Figure 8: Value of wheat exports from the Western Cape Province

50000000 45000000 40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Period (Years)
City of Cape Town Metropolitan Municipality Overberg District Municipality Cape Winelands District Municipality

Source: Quantec Easy data

In the Western Cape Province, the wheat exported is mainly through the City of Cape Town Metropolitan Municipality precisely due to the use of the Cape Town Harbor as an exit point for the export of wheat. The Cape Wine-lands district only recorded exports of wheat between the years 2007 and 2008 while very menial export value was recorded from the Overberg district during 2006. From the Western Cape it is clear from Figure 9 that there were no wheat exports from the Cape Wine-lands and Overberg Districts between the periods 2000 and 2005. The highest value of wheat exports from the Western Cape Province was recorded from City of Cape Town District during the year 2009.
Figure 9: Value of wheat exports from Kwazulu-Natal Province
45000000 40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Period (Years) UMgungundlovu District municipality Amajuba District municipality Umzinyathi District municipality eThekwini Metropolitan Municipality

Exports Value (Rands)

Source: Quantec Easy data

Exports Value (Rands)

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The value of wheat exports originating from the KwaZulu-Natal Province are mainly through the eThekwini Metropolitan District with intermittent exports recorded from UMgungundlovu, UMzinyathi and Amajuba districts. The value of wheat exports through the eThekwini Metropolitan district has fluctuated considerably during the period under review and reached a peak in 2009.
Figure 10: Value of Wheat Exports from Gauteng Province
1200000000 1000000000 800000000 600000000 400000000 200000000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Period (Years)
Sedibeng District municipality Ekurhuleni Metropolitan Municipality City of Tshwane Metropolitan Municipality West Rand District Municipality City of Johannesburg Metropolitan Municipality

Source: Quantec Easy data

Figures 9 and 10 further confirm an earlier observation about the role played by the Randfontein grain market and the Durban harbor in the trading of grain products. The City of Johannesburg Metropolitan district commanded the greatest shares of wheat exports in Gauteng between the periods 2000 and 2009 exhibiting a similar trend shown in Figure 8. The values of wheat exports from the other four districts within the Gauteng Province have been very low during the same period under review. 2.2.1 SHARE ANALYSIS Table 2: Share of provincial wheat exports to the total RSA wheat exports (%) Years Province Western Cape Kwazulu-Natal Gauteng Mpumalanga Limpopo 0.02 6.47 93.50 0.00 0.00 0.04 2.45 97.50 0.00 0.00 0.14 2.11 59.25 38.48 0.00 0.85 12.51 50.83 35.79 0.00 0.00 32.19 67.80 0.00 0.00 0.00 6.05 93.93 0.00 0.00 10.43 0.02 89.54 0.00 0.00 56.33 1.19 42.46 0.00 0.00 5.76 0.83 93.39 0.00 0.00 20.16 16.77 60.81 0.00 0.41 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Calculated from Quantec Easy data

Table 2 above indicates that between the periods 2000 and 2009, the Gauteng province commanded the greatest share of wheat exports with the exception of the 2007 year when the Western Cape

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Province commanded 56% of wheat exports from South Africa. Smaller wheat export values were also recorded from the Kwazulu-Natal province during the same period with irregular intermittent exports occurring through the Mpumalanga province. This observation is in contrast to the trends in wheat production domestically, since wheat is produced mainly from the Western Cape, Free State, and Northern Cape and North West provinces of the country. It stands to reason that wheat produced in these provinces is moved to the Gauteng Province where the major exporters are situated and due to the trading of grain that occurs through the Randfontein grain market, the greatest percentage of wheat is recorded as originating from the Gauteng Province. Table 3: Share of district wheat exports to the total Kwazulu-Natal provincial wheat exports (%) Years District UMgungundlovu UMzinyathi Amajuba EThekwini 0.00 0.00 0.00 100 0.00 0.00 0.00 100 0.00 0.00 10.62 89.37 0.00 0.00 0.00 100 0.00 0.00 0.00 100 0.00 0.00 0.00 100 0.00 100 0.00 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

99.98 99.99

Source: Calculated from Quantec Easy data

During the period under review the eThekwini Metropolitan Municipality commanded the greatest share of wheat exports from the KZN Province with the exception of the 2006 year when all wheat exports occurred through the UMzinyathi district of the province. Table 4: Share of district wheat exports to the total Gauteng provincial wheat exports (%) Years District West Rand Ekurhuleni City of Johannesburg City of Tshwane 0.00 0.00 100 0.00 0.00 0.00 100 0.00 0.08 2.06 95.64 4.27 0.14 0.00 55.25 44.60 8.53 0.02 90.02 1.41 0.00 0.00 99.95 0.05 5.46 0.66 93.86 0.00 1.51 0.00 98.49 0.00 0.01 2.22 97.76 0.00 0.00 0.28 42.41 57.30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Calculated from Quantec Easy data

In the Gauteng province, the City of Johannesburg Metropolitan Municipality commanded the greatest share of wheat exports between the years 2000 and 2009. Menial and irregular export values for wheat were also recorded in the West Rand, Ekurhuleni and City of Tshwane districts. As mentioned earlier on, that the Gauteng province commands the greatest share of wheat exports primarily because of the presence of the majority of exporters in the province, the role played by the Randfontein grain market and the comparative advantages Gauteng has over other provinces in terms of the availability of marketing infrastructure and logistics support services.

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Table 5: Share of district wheat exports to the total Western Cape provincial wheat exports (%) Years District City of Cape Town Cape Wine-lands Overberg 100 0.00 0.00 100 0.00 0.00 100 0.00 0.00 100 0.00 0.00 100 0.02 0.00 100 0.00 0.00 99.99 86.78 56.49 99.99 0.00 0.01 13.21 43.50 0.003 0.00 0.00 0.004 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Calculated from Quantec Easy data

Between the years 2000 and 2009 the City of Cape Town Metropolitan Municipality commanded the greatest share of wheat exports originating from the Western Cape Province with the Cape Wine-lands district recording smaller export values during 2007 and increasing its share during 2008. In 2009 Overberg and Cape Winelands Districts contributed less than 0.1% to the Western Capes total wheat exports while the City of Cape Town commanded the greatest share with about 99.99%.

2.3

WHEAT IMPORTS
South Africa is not a major producer of wheat in the world; it imports wheat to supplement domestic production. We are a net importer of wheat with a self-sufficiency index of around 80% to 85%. The major producers of wheat in the world are: China, EU Countries, USA, India, Canada, and Eastern European countries, Turkey, Australia and Argentina. These countries produce almost 90% of the world production. The top countries where South Africa imports wheat from are Argentina, Australia, France, UK and the USA.
Figure 11: Wheat Imports
1600000 1400000

Quantity (tons)

1200000 1000000 800000 600000 400000 200000 0

Series2 2000 624000 2001 308000 2002 407000 2003 747000 2004 1042000 2005 1227000 2006 569000 2007 1098444 2008 1396000 2009 1315506

Period (Years)
Source: Agricultural Statistics & Quantec Easy Data

Figure 12 indicates that wheat imports fluctuated considerably in volume over the past decade. The quantities of wheat imported during the years before 2003 were lower than 800 thousand tons mainly due to the larger production volumes that were experienced locally during the past seasons. Due to a shortage of wheat in the country from 2004 that was caused by a decline in production volumes that occurred while the consumption remained relatively stable during that period, wheat

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imports increased considerably by volume. Imports of wheat have increased by approximately 60% between 2003 and 2005. The increase is due to unfavorable production seasons experienced by domestic producers. Rainfall was erratic and below normal in many areas of the main producing regions, which resulted in lower yields. During the year 2006 imports of wheat declined substantially in volume terms owing to a slight recovery in production but increased again between 2007 and 2008, followed by a slight decline in 2009.
Figure 12: Volume of wheat imports from various regions
90000000 80000000

Imports Volume (Ton)

70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Period (Years) Africa Americas Asia Europe Oceania

Source: Quantec Easy Data

South Africa imports wheat mainly from the Americas and Oceania and on a smaller scale from some Asian and African countries. Figure 13 indicates that during the period under review South Africa has imported wheat mainly from the Americas with a substantial decline in the volume of the wheat imports originating from the Americas between 2006 and 2009.

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Figure 13: Volume of wheat imports from the Americas

30000000 25000000 20000000 15000000 10000000 5000000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Period (Years) South America NAFTA

Source: Quantec Easy Data

In the Americas wheat imports originated mainly from South America and NAFTA (North American Free Trade Area). The value of wheat imports originating from NAFTA into South Africa experienced a continual increase from the year 2003 until a peak was reached in 2005, followed by a decline until 2009.
Figure 14: Volume of wheat imports from NAFTA
30000000 25000000

Imports Volume (Ton)

Imports Volume (Rands)

20000000 15000000 10000000 5000000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Period (Years)
Canada Mexico United States

Source: Quantec Easy Data

In the North American Free Trade Area (NAFTA), imports of wheat into South Africa originate mainly from the USA and Canada while Mexico recorded menial exports during 2006 and 2008. 246 wHeAT MArKeT VAlue CHAIn ProfIle 2010-2011

The USA has been a consistent supplier of wheat to South Africa between the period 2003 and 2005 having shown increases in the volume of wheat exports to South Africa over the same period. The USA and Canada are amongst the worlds largest producers of wheat and this can be one of the reasons for lager amounts of wheat imports from these countries.
Figure 15: Volume of wheat imports from South America
2500000 2000000 1500000 1000000 500000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Period (Years) Argentina Brazil

Source: Quantec Easy Data

Argentina in South America has been a consistent sole supplier of wheat imports into the RSA between 2000 and 2009. The volume of wheat imports from Argentina increased from the lowest levels in 2000 to attain a peak in 2001 but later declined until 2003. A marginal increase in the volume of wheat imports from Argentina then occurred between 2004 and 2007 with substantial increase recorded during 2008. During the year 2009, volume of wheat imports from Argentina declined while those from Brazil increased marginally.

Imports Volume (Ton)

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Figure 16: Volume of wheat imports from Oceania

90000000 80000000 70000000

Volume (Tons)

60000000 50000000 40000000 30000000 20000000 10000000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Period (Years) Australia

Source: Quantec Easy Data

Imports of wheat from Oceania originate mainly from Australia and, the volume of wheat imports from this country into South Africa has undergone tremendous fluctuations during the entire period under review with a peak attained during the year 2001. A substantial decline in imports originating from Australia was recorded between the years 2002 and 2004 owing mainly to increased imports originating from the Americas. Only minimum amounts of wheat were imported from Oceania, particularly Australia, between the years 2005 and 2009.
Figure 17: Volume of wheat imports from Asia
140000 120000

Imports Volume (Tons)

100000 80000 60000 40000 20000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Period (Years) Eastern Asia South-central Asia South-eastern Asia Western Asia

Source: Quantec Easy Data

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In Asia, South Africa has imported wheat from South-Central-Asia between 2002 and 2004 with a peak during 2002 and thereafter declined substantially until 2009. Intermittent import volumes for wheat have also been recorded as originating from Eastern, South-eastern and Western Asia.

2.4

MARKET VALUE CHAIN

The local market for South African wheat industry includes the milling industry, the baking industry and the retail sector. Figure 18: The Wheat Market Value Chain

Input Suppliers

Wheat farming

Storage

Imported Wheat

Milling
Imported Flour

Imported Wheat

Baking

Wheat based Goods Manufacture

Animal Feed Manufacture

Wholesalers

Poultry & Meat Farming

Retailers

Consumers

Input suppliers provide seeds, fertilizer, pesticides fuel, etc to farmers who the grow wheat. The wheat is harvested and stored in numerous storage facilities, including imported wheat. This is then delivered to milling companies who mill the wheat into wheat flour, meal and bran that are used in three different ways. The wheat flour can be used in the baking industry to manufacture perishable products such as pan loaves, rolls, buns, confectionery products and other products such as frozen dough and par baked products. Wheat based goods products such as biscuits, pasta, crackers and breakfast cereals can also be manufactured from the wheat flour. The animal feed manufacturing industry also uses the wheat meal and bran to manufacture farm feeds and pet foods. 2.4.1 BAKING INDUSTRY According to the South African Chamber of Baking there are five different types of baking units namely: plant, wholesale, industrial, in-store and other bakeries. There are a large number of informal bakers. The bakers produce mainly bread and other products like biscuits, pies, pizzas etc. The plant bakeries are still popular although there is a significant number of retail baking which may impact negatively on the plant bakeries. According to the HSRC survey (2002) the baking units in South Africa are estimated at 7 905, providing approximately 45 500 job opportunities. The Food Price Monitoring Committee report also indicates that there are approximately 52 200 informal bakers who operate in non licensed premises. Growth in this industry took place through the

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establishment of franchises and in- store bakeries. The major companies are Albany, Blue Ribbon, Sasko, Sunbake and BB Cereals. 2.4.2 WHEAT VALUE CHAIN TREE With the exception of the milling process explained earlier on, that produces wheat flour, bran and meal wheat is also suitable for other products. The fact that it contains gluten Figure 19: Wheat Value Chain Tree
Strawboards for furniture, floors and kitchen cabinets Cosmetics such as shampoos & conditioners

Wheat Stubble Meat substitutes Wheat Protein Wheat Wheat beer Wheat meal & bran
Animal Feeds, Pet food Cereal products

Wheat Gluten

Biodegradable Plastics

Paper Adhesives Ethanol Blasting/ Paint stripping Fat replacement in desserts Other Confectionery products

Wheat Starch Wheat flour

Bread

(Protein) and starch also make it functional in non-food and industrial applications. Wheat gluten has the ability to be elastic, bind water and form films that can be stabilized with heat. These properties render wheat useful for the preparations of adhesives, coatings, polymers and resins. Wheat is being utilized in many other products as shown in Figure 22.

3.

MARKET INTELLIGENCE
The following tariffs are applied by the various export markets to wheat originating from South Africa:

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Table 6 COUNTRY PERIOD Durum Wheat (10011000) Zimbabwe Wheat and Meslin: excl. durum wheat (10019000) Durum Wheat (11011090) Durum Wheat (11011090) Zambia Wheat and Meslin: excl. durum wheat (10019090) Wheat and Meslin: excl. durum wheat (10019090) Durum Wheat (10011000) Malawi Wheat and Meslin: excl. durum wheat (10019000) Durum Wheat (10011000) Durum Wheat (10011000) Durum Wheat (10011090) Kenya Wheat and Meslin: excl. durum wheat (10019020) Durum Wheat (10011000) MFN duties (Applied) MFN duties (Applied) MFN duties (Applied) PRODUCT DECRIPTION TRADE REGIME APPLIED ESTIMATED TOTAL AD DESCRIPTION TARIFFS VALOREM EQUIVALENT TARIFF 2010 0.00% 0.00%

0.00%

0.00%

15.00%

15.00% 0.00%

Preferential Tariff 0.00% for South Africa MFN duties (Applied) 15.00%

15.00%

Preferential Tariff 0.00% for South Africa MFN duties (Applied) MFN duties (Applied) MFN duties (Applied) 0.00%

0.00%

0.00%

0.00%

0.00%

2.5%

2.5% 0.00% 0.00%

Mozambique

Preferential Tariff 0.00% for South Africa MFN duties (Applied) MFN duties (Applied) MFN duties (Applied) MFN duties (Applied) 0.00%

35.00%

35.00%

5.00% 5.00%

5.00% 5.00%

DRC

Source: ITC Market Access Map

Taking into account the tariff levels, it is evident from Table 6 that the potential markets for the export of wheat originating from South Africa are Malawi, Mozambique, Zambia and Zimbabwe mainly because they do not charge tariffs on the wheat originating from South Africa. Although countries such as Zambia and Mozambique charge tariffs on wheat imports, South Africa benefits

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from the SADC Free Trade Agreement and does not have to pay any tariff to export wheat to these countries. Zimbabwe and Malawi do not levy any duties on wheat imports. The DRC applies a 5% ad valorem on wheat imports originating from the rest of the world including South Africa. As far as import tariffs are concerned, South Africa levies a tariff of R260.90/ton on imports of wheat originating from the rest of the world except member states of SADC. Due to the SADC Free Trade Agreement SADC member states can export wheat to South Africa free of duty. A tariff charged by South Africa on imports of wheat or meslin flour is R391.30/ton.

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4.

PERFORMANCE
Figure 20

Source: ITC Trade Map

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Between 2005 and 2009 South Africa has experienced a massive increase in the value of wheat imports from the rest of the world. South Africas total wheat imports from the world increased by 21% in value between the years 2005 and 2009. Figure 20 and Table 7 indicate that South Africa experienced a decline in imports of wheat from Australia, Ukraine, Italy and USA. Imports from Germany and Argentina increased by 48% and 8% respectively in value between the years 2005 and 2009. Table 7: List of supplying markets for the wheat imported by South Africa in 2009 Imported growth in quantity between 2005 and 2009, % p.a. 5 27 -13 -9 37 -11 -56 26 -6 80 Imported growth in value between 20082009, % p.a. -37 125 -79 -74 -89 Share in South Africas Imports (%) Imported Value in 2009 (US $ thousand) Imported Quantity in 2009 (tons) Unit Value (US $/ton) 209 200 254 246 218 181 176 159 193 738 -2 58 -55 8 48 Imported growth in Value between 2005-2009, % p.a. 21

World Germany Argentina Australia Canada USA Brazil Ukraine Poland India
Source: ITC Trade Map

Exporters

274 841 157 744 50 122 24 637 10 481 10 164 8 836 7 981 4 819 31 0 42 1.8 25 016 2.9 50 308 3.2 50 146 3.7 56 033 3.8 47 979 9 100 102 18.2 197 252 57.4 788 919

100

1315856

Figure 21 and Table 7 also indicate that Germany and Argentina are the biggest suppliers of wheat to South Africa having contributed 57.4% and 18.2% to South Africas total wheat imports. Figure 21 also indicates that growth of these countries wheat exports to South Africa is faster than the growth in their wheat exports to the rest of the world. The figure and the Table also show that South Africa also imported wheat from countries such as Australia, Canada, USA and Brazil. As indicated in Figure 21, should South Africa wish to diversify its imports of wheat and meslin, big markets exist in France, Canada and Malawi.

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Figure 21

Source: ITC Trade Map

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The list of importing markets for the wheat exported by South Africa is shown in the following table (Table 8) Table 8: List of importing markets for wheat exported by South Africa in 2009 Exported Growth in quantity between 2005 and 2009 (% p.a.) 48 148 9 101 9814 -94 57 Exported Growth in Value between 2008and 2009(% p.a.) -79 Exported Quantity in 2009 (tons) Exported Growth in Value between 2005 -2009 (% p.a.) 96 190 62 73 -32 Unit Value (US $/ ton) 346 319 448 364 500 3 000 -

World Zimbabwe Zambia Mozambique Malawi Kenya DRC

Source: ITC Trade Map

27 412 19 792 6 823 694 73 15 6 0 0 0.1 5 0.3 146 2.5 1 904 24.9 15 244 72.2 62 026

Share in South Africas Exports (%) 100 79 337

The major export markets for wheat originating from South Africa are Zimbabwe, Zambia, Mozambique and Malawi. Table 8 and Figure 22 indicate that Zimbabwe is the biggest importer of wheat from South Africa followed by Zambia, Mozambique and Malawi. In 2009 Zimbabwe absorbed 72.2% of South Africas total wheat exports followed by Zambia and Mozambique with 24.9 and 2.5% respectively. Table 8 further indicates that volume exports of wheat from South Africa to Zimbabwe increased by 148% while those to Zambia and Mozambique increased by 9% and 101% respectively.

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Exported Value in 2009 (US $ thousand)

Importers

Figure 21

Source: ITC Trade Map

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5.
5.1
5.1.1

ORGANIZATIONAL ANALYSIS OF THE INDUSTRY

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS
WHEAT PRODUCERS Strengths Production knowledge has been acquired over many years The industry is well supported by a strong producers organization and sound cultivar base for production Is an important contributor to the economy of the rural areas and the total agricultural GDP Weaknesses Expensive crop insurance and limited insurance capacity Slow adoption of hedging mechanisms to reduce price risk Climatic variability resulting in variable production patterns, particularly in summer rainfall areas Limited number of new entrants from the developing sector Inadequate extension services Opportunities There are possibilities to increase supply to satisfy the local and regional demand and possibly satisfy niche export markets Can lead to increases in employment in rural areas Incorporate developing commercial farmers to expand capacity Significant productive capacity is available There are possibilities of producing durum wheat Threats Subsidies imports / dumping

Slow administrative processes to adjust tariffs Deterioration of rail networks servicing the silos High transport costs resulting in low farm gate prices Non-tariff barriers affect South African wheat exports negatively

5.1.2

MILLERS Strengths Well organized industry associations There are sound infrastructure and training standards Developed telecommunication network Availability of labor force There is a strong Export Committee and highly skilled professionals and institutions for research Inadequate protection against unfair competition Weaknesses High input costs Lack of innovation for new products Low export orientation Highly distorted international market

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Opportunities Beneficiation of raw material There is available production capacity There is domestic and regional demand There exist preferential export markets (in terms of African Growth and Opportunities Act, European Union, Southern African Development Community)

Threats Unfair competition from cheap subsidized imports Non-tariff barriers by SACU and SADC members Changes in consumer preferences Changes in regional dynamics and multi-lateral arrangements

Shift in consumer demand from maize meal to Lack of customized incentives bread Poor domestic/regional market economic conditions 5.1.3 BAKERS Strengths Stable market particularly for bread Market growth particularly for confectionery products A diversified product market with a wide range of baked products that can be marketed Strong domestic market Use of first world baking technology, processes and equipment A strong core of dynamic entrepreneurs and baking specialists Weaknesses Uninformed and inexperienced entrants into the baking industry Non-compliance with bread mass regulations Limited commitment to training and BEE and women empowerment Overall poor legislative control and patchy quality control

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Opportunities Growth potential for bread as household incomes increase Market opportunities for a wide range of value added baked products Promotional opportunities as a result of the introduction of fortified bread Opportunities for bakers and baking stakeholders in Africa Development of HACCP systems for the industry Development of products with health enhancing properties Development of financing packages tailored to the needs of small entrepreneurs and BEE entrants to the industry

Threats High cost of inputs Market saturation Imported baked products particularly biscuits Health scare stories related to baked products Unavailability of suitable trained personnel in the industry

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