World Commodities-Wheat sees prices hit highest level |26 October 2007

According to The Public Ledger, which publishes world commodity prices weekly, US futures have surged to new highs due to relentless demand and renewed concerns over dwindling global stocks driven by uncertainty over Australia's developing crop.

Last week, December wheat futures on the Chicago Board of Trade (Cbot) saw a record close for the contract of $9.33 a bushel, having reached the highest point ever for the front month of $9.4675 a bushel.

The March wheat contract at Cbot closed at $9.365 a bushel, after posting a high for any wheat contract of $9.4975 a bushel earlier. 

The upward momentum followed the sale of another 200,000 tonnes of US hard red winter wheat to Algeria, raising the total purchases of US wheat by Algeria to 500,000 tonnes for the week. In addition, Jordan and Morocco were each in the market for at least another 100,000 tonnes.

Uncertainty over Australia's wheat crop fuelled worries about tightening world stocks and lent further support to prices. Australia's 2007/08 wheat crop could shrink to 12m tonnes if rain does not fall in the next two weeks.

The Ukrainian government has outlined quotas on grain exports from November 1 that are expected to curtail sales after drought damaged crops. Russia also confirmed that it would impose a previously announced 10% wheat export duty.

The price of wheat flour in Seychelles

With the record high prices of wheat worldwide, an importer in Seychelles today would pay about $800 (US) per ton c.i.f to bring White High Protein Flour into Port Victoria. With 0% trades tax, 12% GST, and the permitted 30% markup on the bill of entry, this translates to a retail price to the consumer of R 9.32 per kg.

SMB, which is still selling the flour at R5.10 a kilo is clearly making a big loss in the trading of this commodity locally. Because of the large quantity of flour imported it has to be kept in air conditioned storage. And there is a list of other costs such as port charges & transport.

No other importers will bring in the flour and retail at less than R9.32 a kilo. They will also find the competition unfair because of SMB’s unrealistically low price structure. Their stock will not sell.

SMB does not charge consumers for GST on a list of basic items but still pays the sales tax to government, rendering its trading operations even less sustainable in the face of price increases worldwide.

White High Protein Flour is the type that bakers use for making and selling sliced bread. It represents about 95% of the local demand for flour.

 
Fuel prices

As at 24th October 2007:

Petrol (bennzin)      R4.65 a litre cif

Diesel                   R5.10 a litre cif

There have been significant changes in the landed costs of LPG from 2005 to 2007.

LPG   September 2005      R3.55 a kilo

LPG   August       2006     R4.08 a kilo

LPG   October     2006     R6.84 a kilo