The duties on wheat have dropped 54.42c per kg to 10.27c per kg and flour from 81.63c per kg to 15.41c per kg. The only region this does not apply to is SADC (and of course SACU as we are a Customs Union).

This 80% drop in wheat duty levels will have interesting implication on the pasta trade. As I have written about before, the pending anti-dumping duties on pasta will (if implemented) disproportionately benefit Namibia and Botswana as they don’t pay duties on wheat, but have duty free access to South Africa on products made from wheat (such as pasta). Given that SA only produces 50% of the wheat we consume, we are always importing. Most of the cost of pasta, so as the wheat duties increase, the cost of pasta production in South Africa goes up, but does not rise in the other SACU countries.

In order for the duty to be high, as it was before this change, the global price of wheat must be be low, giving a disproportionate advantage to the other SACU countries. For the duties to have dropped as much as they have, would mean there has been a commensurate increase in the global price of wheat. This has the effect of narrowing the gap between the production cost of pasta in Namibia / Botswana and South Africa. It also will make the other imported pasta more competitive, especially in the countries where wheat production is subsidised or where it is exceptionally productively grown, such as Eastern Europe (there is a reason so much pasta comes into SA from Latvia and Lithuania). Of course imports from the EU also attract no duties on pasta, compared to 40% from elsewhere.

With a provisional anti-dumping duty decision due shortly on pasta, it will be interesting to see where this lands. The duty position requested was:

CountryDumping margin
Egypt43.27%
Latvia68.41%
Lithuania2.45%
Turkey367.25%

Bu there have been responses from at least some of these countries. If the duties are implemented anywhere close to the requested position, then some trade will swing to Lithuania (although I doubt they have sufficient spare capacity to meet the new extra demand), as well as towards other Eastern European (or even Western European) producers.

The drop in wheat duties will place pressure on the Namibian and Botswana supply and given the quantum of the change in both the wheat price and the duty levels, may very well result in other sources of supply popping up.

What to know more? Say hello at info@xa.co.za

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