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Low grain prices, rising input costs, and tightening margins are driving a sharp decline in grain producer confidence across profitability and investment measures. Grain SAs latest grain barometer, presented as a producer ‘reality check’ at the organisation’s annual congress at Nampo Park, paints a bleak picture.
Confidence has dropped sharply since last year’s congress. Only 40% of the producers who attended, reported being more profitable than the previous season. Confidence in the next season also stands at 40%, while only half of the attending producers have confidence in the long-term prospects for the industry. Less than a third (30%) of the producers feel comfortable investing in their farms at present.
Wheat production under pressure
Wheat producers painted a concerning picture. The economic sustainability of wheat production in South Africa is under significant pressure. This emerged during the winter grain working session on day two of the congress. According to José de Kock, chairperson of the working group, the pressure is evident in declining auction and land prices. Several factors are beyond local control, with international price levels as the main driver. He said the decline in nationally planted wheat hectares is now an established trend. Alternative crops, especially maize and soybeans, offer better returns. This has led many producers to shift away from wheat.
In the Western Cape, however, viable alternatives are limited. Global production trends show that grain output averaged about 480 million tons over the past five years. Production rose by nearly 50 million tons in the past year alone. This surplus has pushed commodity prices lower. At the same time, input costs continue to rise. This combination places producers under financial pressure and often makes wheat production unprofitable.
De Kock said South Africa is a net importer of wheat. National production is typically just over 1,8 million tons, depending on seasonal conditions. Annual consumption ranges between 3 million and 3,5 million tons. Imports are therefore essential. Local production covers only about 56% of demand. As a result, local producers often receive lower prices than imported wheat. He added that South Africa was once self-sufficient in wheat, but this is no longer the case.
The location differential
In response to how the wheat sector can become self-sufficient again, De Kock pointed to the role of the Johannesburg Stock Exchange (JSE), specifically the impact of the high location differential. During the 2023/24 marketing year, the wheat location differential rose to about R800 per ton. It applies to trading on the JSE Commodities Derivatives Market (former Safex) and is also used in the cash market for transport and delivery. This is a key concern. De Kock said South Africa has not developed an efficient, balanced cash and hedging market. A functional cash market should compensate producers based on actual transport costs. In practice, the cash market follows the futures market, leading to price distortions.
At the congress, Koos Blanckenberg, a Swartland producer, submitted a motion on the JSEs handling of requests for a fair and accurate JSE wheat contract. He said producers are increasingly frustrated with slow decision-making. De Kock said dissatisfaction centres on the revised alternative location differential method. Producers support it because it reflects real transport flows.
The Western Cape produces approximately one million tons of wheat annually. Provincial consumption is about 683 000 tons. The surplus moves north. The current model treats grain as if delivered in Randfontein, and this inflates transport costs. The proposed model is more dynamic and region-specific. If supply and demand balance in a region, transport cost is zero, since only surplus movement is priced. The model works at silo level. It gives producers more accurate, local market information. This supports better decisions and prices closer to real logistics costs.
The model was introduced in the soybean industry two years ago through a pilot period that was completed in February 2026. De Kock said it should now be applied to wheat. Implementation is delayed by existing forward contracts. These must expire before a new structure can be introduced. Producers, however, face growing time pressure. Vuyo Mpumza, the manager of commodity derivatives at the JSE, attended the winter grain session. De Kock said this offers some hope. It was the first time the JSE attended such a session and engaged directly with producers’ concerns.
Heleen Viljoen, Grain SA economist, explained during the working session that the portion of the wheat price represented by the location differential in the Western Cape is four times higher than that of international competitors. In contrast, producers in the United States and Australia deliver grain at points with no location differential.
Wheat tariff mechanism
De Kock said the wheat tariff mechanism remains a critical factor affecting the industry, as tariff adjustments are not announced on time. He noted that although a protection mechanism exists, an application has been submitted for tariff adjustments to be announced automatically on a monthly basis – similar to how fuel prices are adjusted. However, the industry has been waiting more than 18 months for feedback.
Minister of agriculture, John Steenhuisen, who attended the congress on the first day, said South Africa’s wheat industry operates under unique structural conditions compared to major global producers. The tariff mechanism is designed to maintain balance. It is not intended to close markets, but to cushion sharp international price movements. For this to work, it must be predictable and timely.
He said since April 2025, he has engaged with minister Parks Tau of the Department of Trade, Industry and Competition (DTIC) regarding delays in tariff adjustments. These delays create uncertainty. Imports can add millions of rand in costs, and these costs move through the value chain, placing pressure on producers, especially in the Western Cape, Free State, and Northern Cape. Even short delays can weaken financial sustainability. A possible solution is an automated system. Tariff adjustments would take effect immediately once thresholds are reached. Predictability and consistency are essential for a stable market.
In response, José de Kock said Steenhuisen appears well informed, but many issues fall under different government departments. The core frustration for producers is the lack of timely feedback and decision-making. They are under pressure and have limited time to adapt. De Kock added that higher yields and better prices are needed to restore profitability. Wheat production must be economically viable. He also noted rising imports of white wheat, which may create opportunities for local producers. However, quality is critical. The focus must be on high baking-quality wheat, not low-quality feed-grade grain.
Article seven committee
Producers hope the Wheat Forum’s request to establish an Article seven committee under the Agricultural Marketing of Agricultural Products Act will be approved. The committee will examine the wheat value chain, focusing on contentious issues, including potential unfairness in the tariff mechanism.
Steenhuisen stressed that market transparency and competitiveness are critical for industry sustainability. He said significant progress has been made in appointing a new board for the committee. The process is linked to the governance framework of the National Agricultural Marketing Council (NAMC), as the committee must be chaired by a council member. The selection committee has submitted its report, and candidates have been carefully evaluated. Appointments were made to ensure the board has the expertise and capacity to address complex market challenges. Once appointments are finalized, the Article seven committee can be formally established.
Public and private co-operation
Steenhuisen also noted that infrastructure is a major structural pressure on grain producers – but one that can be addressed. Grain production relies on efficient logistics and reliable transport networks. In 2011, about 20% of grain and oilseeds were transported by rail. By 2025, this fell to 3%, shifting more freight to roads. This strains road infrastructure, raising logistics costs across the value chain and reducing producer margins. Poor rural roads in many regions act as cost multipliers, with slower transport, higher maintenance, more fuel use, and delays adding cumulative pressure.
To address this, a co-operation agreement between Dean Macpherson, Agri SA, Agbiz, and Infrastructure South Africa, focuses on integrated infrastructure planning based on actual freight flows and production patterns. A Free State pilot project will map and prioritise key agricultural corridors for targeted investment and maintenance. Steenhuisen said such public-private partnerships can improve planning, boost logistics efficiency, reduce costs, and support sustainable growth in agriculture. – Christal-Lize Muller, Plaas Media.
