Grain SA Says Soybean Pricing Method Could Add R696 Million in Costs

Grain SA says nearly R700 million in value could be at stake in the Johannesburg Stock Exchange’s decision to discontinue the soybean Multiple Reference Point methodology and return to a Single Reference Point system.

The JSE has decided to oppose Grain SA’s interdict application challenging the decision. Grain SA says the change could result in significantly higher transport deductions for soybean producers and add unnecessary costs throughout the agricultural value chain.

Grain SA estimates the average transport deduction under the Multiple Reference Point methodology at about R113 per ton, compared with approximately R333 per ton under the Single Reference Point system. The difference of about R220 per ton translates to an estimated R696 million across relevant soybean volumes and silo points.

The organization says the Multiple Reference Point model considers where soybeans are available, where processing demand exists and the most efficient transportation route between the two. The Single Reference Point system calculates the differential in relation to one central point, even when soybeans may move in another direction to reach a processor or buyer.

Grain SA says the resulting difference could increase deductions from prices received by soybean producers in the cash market. It also says additional transportation costs and inefficiencies could move through the broader food value chain, affecting processors, manufacturers and consumers.

Grain SA remains concerned that the decision to reject the Multiple Reference Point model was not supported by sufficient quantitative evidence and that agreed evaluation criteria were not adequately addressed.

The organization says the issue extends beyond the calculation of a transportation differential because the pricing methodology can influence how efficiently grain moves from production areas to processing markets.

Grain SA is calling for a pricing system that reflects actual grain movements, uses efficient routes between supply and demand, avoids unnecessary costs, protects the integrity of price discovery and supports an efficient food value chain.

The organization says it will continue pursuing appropriate processes to protect producer interests and promote a fair, transparent and efficient agricultural derivatives market.

Source: Grain SA, "More than R600 million difference raises serious questions for Farmers and Consumers"