TFR Locomotive. Photo: Craig Dean

Tshepiso Mokhema

Transnet’s plan to restore agricultural rail networks will cut transport costs for growers and help lower food prices, according to Grain SA, which represents commercial farmers.

“We will be over the moon if they can get the tonnages moved by rail to increase,” Grain SA chief executive Jannie de Villiers said last week. “The moment you increase rail potential, it will bring down the average cost of transporting grain in this country. This is also good news for farmers.”

Transnet would assess routes that had been abandoned because volumes were low, Brian Molefe, the chief executive of the transport parastatal, said. It would look at providing new services, especially to areas where sugar, maize, wheat and fruit were grown, he said.

The percentage of grain transported by rail in South Africa had fallen to 23 percent from as much as 80 percent, De Villiers said.

Transnet plans to spend R300 billion to upgrade railways, ports and pipelines to address the bottlenecks stifling economic growth.

Inflation rose to an annual 6.1 percent last month from 6 percent in March, with food-price growth quickening to 9.1 percent from 8.9 percent, Statistics SA data show.

Improved rail options would increase the competitiveness of grain exports, De Villiers said.

“If we can get the grain from where it’s produced to Durban port at a cheaper rate, we will be more competitive and that will enable us to… keep our position in international markets. We really look forward to seeing those numbers increase,” he said.

Farmers exported maize to markets including South Korea, Taiwan and Spain in 2011 after a year earlier producing the biggest crop since 1982, depressing prices. Shipments in the season that ended in April rose 18 percent year on year to 2.44 million tons, a nine-year high, the SA Grain Information Service said earlier this month.

The JSE’s SA Futures Exchange (Safex) increased the price differential used to indicate the cost of transporting maize to silos in the country by an average 8.5 percent for the year that started on May 1.

The average advance equates to R15 a ton. The differential is applied to contracts to reflect the cost of moving stock from any one of 198 Safex-registered silos in the country to Randfontein.

White maize for July delivery gained 0.5 percent to R2 050 by the noon close on Safex yesterday. Yellow maize for the same month rose 0.7 percent to R2 027 a ton. July wheat added 1.1 percent to R2 962 a ton. – Bloomberg Markets, page 21