Grain floor prices explained

White maize, mahangu and wheat are staple crops for many Namibians and therefore bear important implications for poverty alleviation and the achievement of food security.According to the Namibian Agronomic Board (NAB) these grain crops are currently gazetted as controlled crops in line with the Agronomic Industry Act.It says that although the three crops are locally produced, large volumes are still imported to meet local demand and therefore the market for locally produced grains is driven by registered millers who process grains into various value-added products.“Each year, millers’ and producers’ representatives negotiate and agree on the principles of the grain marketing agreement and the reference price formula for determining a minimum floor price for the intake of local grains during the closed border period marketing season,” says the NAB.The marketing agreements for grains are implemented by the NAB to provide a secure market for the Namibian grain farmers during the harvesting season, and to ensure that such grains are not marketed below the minimum price.NAB explains that based on the industry agreed price formula, organisation determines grain floor prices during the marketing season. The floor price is the minimum selling price of locally produced grain to be paid to the farmer per tonne at the mill door or farm gate.“Consequently, a miller may offer a producer a higher price, but producers and processors hardly negotiate for a higher selling price than the minimum floor price.”Price calculationsThe grain minimum floor price remains fixed during the marketing season, with the exception of white maize which staggers every fortnight to cover storage costs on the South African Future Exchange (Safex) component.The price of white maize is based on the import parity price (IPP)and, in this case, the Safex spot prices as Namibia mostly imports grain from South Africa.The IPP is the price at the border of a product that is imported which include that actual Safex spot prices, plus the actual transport costs from Sannieshof in South Africa to Otavi in Namibia. It also includes the Genetically Modified Organism (GMO) free premium, plus the Safex silo premium and a portion of NAB import levy differences.Locally producedMahangu is produced locally, NAB noted, mainly by surplus producers in the communal areas. The minimum price for mahangu is calculated based on the production cost of inputs.“Producers and processors of mahangu calculate the floor price for mahangu based on the production costs per hectare with an understanding that a producer can easily harvest one tonne per hectare.”The formula only includes the variables that are significant in terms of producing mahangu at a commercial level.As a result, NAB determines the floor price per annum, based on the cost of inputs for a specific planting season.With regards to wheat, the floor price is calculated per tonne of wheat grain and as a mill door price. The price formula is based on the combination of the IPP, which includes the Safex price and the import parity for Free on Board rate for what from the Unites States, mainly because Namibia imports 90% of wheat from South Africa and other international markets.

Grain floor prices explained

Comments

Namibian Sun 2025-03-17

Please login to leave a comment

Grain floor prices explained

Comments

Namibian Sun 2025-03-17

Please login to leave a comment

Login