Wheat trades at US$420 a tonne after successful price discovery

Edgar Vhera Agriculture Specialist Writer

WITH most farmers still grappling with the idea of migrating from the open outcry auctions to the digital trading typical of the Zimbabwe Mercantile Exchange (ZMX) weekly auction, those who have done so were all smiles at Wednesday’s event after buyers purchased all the offered wheat at US$420 per tonne, thanks to a successful price discovery process.

Trading of the 2023 wheat also entered its second week of trade on the platform this week.

Statistics from ZMX show that farmers had offered 156, 28 tonnes of wheat at an average price of US$420 per tonne valued at US$65 637,60 this week.

All bids were successful, contrary to last week’s trading in which buyers bid for 231 tonnes at an average price of US$400 per tonne worthy US$92 264. Farmers offered 213 tonnes of wheat at an average price of US$492 per tonne with a total value of US$104 552. A total of 443 bids and offers, with an average price of US$444 per tonne worth US$196 807 were unsuccessful. The wheat bid and offer prices spread was US$92.

Food Crop Contractors Association (FCCA) Chairperson Mr Graeme Murdoch yesterday said the ZMX was only a price discovery mechanism and the onus to participate on this platform rested with farmers.

“ZMX is primarily a price discovery mechanism, now it will be interesting to see if farmers would be willing to take up the option of warehouse receipts,” he said.

Stockfeed Manufacturers Association of Zimbabwe (SMAZ)  Executive administrator Dr Reneth Mano said the discovered wheat price was in tandem with the import parity price.

“If Zimbabwe imported supplementary premium grade wheat from the Black Sea region through the port of Beira, it would land in Harare at between US$400 and US$420 per tonne. Thus, the Government should consider pegging the minimum guaranteed producer price for strictly premium wheat at no more than US$450 per tonne with a premium of US$30 over import parity price as an incentive for domestic production,” Dr Mano said.

He observed that at 70 percent conversion factor, any domestic wheat price above US$450 per tonne would make the country’s flour more expensive at US$650 per tonne, necessitating imports of at least 40 percent of the cheaper wheat from Black Sea region in order to keep bread prices affordable at no more than US$1 per loaf.

The September 22 quoted prices for Johannesburg Stock Exchange (JSE)/South African Futures Exchange (SAFEX) Futures Grain Market Contracts for deliveries in October 2023 through December 2024 show that the average free on board (FOB) in South Africa (SA) was US$344 for the period October to December this year.

If the country is to import from SA it will land in the country at around US$460 per tonne. SA is net importer of premium wheat from   Black Sea region (Russia, Ukraine, Lithuania), added Dr Mano.

The Government is yet to announce the final wheat buying price and payment modalities for this year’s crop after it announced a pre-planting wheat producer price of US$520 per tonne in April this year.

This year the country is expecting a record-breaking wheat harvest of over 420 000 tonnes up from last year’s 375 000 after it registered a 11 percent rise in area planted from 80 885 to 90 192 hectares.

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