Wheat import tariff does not lead to a significant increase in the price of white bread

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Bread is an important staple food in South Africa and it plays an integral role in ensuring national food security. The price consumers pay for bread is exceedingly higher than what farmers receive for the raw commodity. A common misconception is that farmers are responsible for high bread prices, but this is not the case.

In fact, the price is determined by the international wheat price, the exchange rate and the local supply and demand for wheat. Since South Africa is not self-sufficient in the production of wheat, approximately 60% of wheat for local consumption is imported. There is also an import tariff of R911,17 per ton that is expected to increase to R1 224,31 per ton, due to a fall in international wheat prices.

Despite this fact, raw wheat price movements are not the main contributing factor to the increase in the bread price, even with the additional import wheat tariff. When a consumer buys a loaf of white bread, the raw material (wheat) simply costs R2,38 in comparison to the total loaf of bread at R11,76. It is imperative for consumers and other stakeholders to be aware that increases in bread prices are not necessarily linked to increases in wheat farmers’ payments (producer prices), but rather can be attributed to costs further down the value chain. – Grain SA

To find out more about the detailed calculations done to determine the share each stakeholder receives in the bread value chain, read the complete article from Grain SA here.

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