Grain stakeholders talk structured trade

Over the course of history, world grain trade has developed from the stage where grain was only shipped as incidental cargo to its grand status today; an industry in which thousands of tons of grain are moved daily, across the world. Interestingly, as a share of total consumption, traded grain has risen from less than 0.03% in the eighteenth century to more than 10% today, making the sector highly profitable for those who are involved and have the capacity to adapt to changes and shocks which global trade contends with. Structured trading is how most grain is traded in the developed world, and is now expanding in Africa. With sophisticated trading systems already in existence for niche export commodities such as coffee and cut-flowers on the continent, it is ironic that given the growing challenge of feeding a population which is growing exponentially, such systems are still in their infancy for staple commodities in most African countries.

With the highest per capita consumption of grains on the continent reported to be in the north Africa region; Rabobank predicts that Sub-Saharan Africa will eclipse North Africa’s grain demand by 2025 and this presents a significant opportunity for grain suppliers as well as producers in the region.

It is against this backdrop of a high growth potential in our region that SACAU, through support provided by the Technical Centre for Agricultural and Rural Cooperation (CTA), organised training for members of the Southern African Grain Network (SAGNET) on Structured Commodity Trade Finance Training. SAGNET is a regional network of grain value chain stakeholders from Malawi, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. The three-day flagship training was facilitated by the Eastern Africa Grain Council’s (EAGC) specialised training and capacity building division, the Eastern Africa Grain Institute (EAGI).

The training provided participants with a unique opportunity to understand the prospects and risks under regional and international export/ import financing, with special attention paid to warehouse receipt financing. Furthermore, participants learnt how market information systems work to support the growth of the commodity trading environment. Through the use of case studies depicting real life experiences on the success of structured trade finance, the diverse group of individuals contributed to vibrant discussions, further expanded upon by their personal work experiences.

The area of international and regional trade policy was well enjoyed by participants, some of whom expressed the expectation of being in an improved position to influence policy and effect change upon their return to their respective countries. A session on trade contracts and dispute resolution was covered on the last day, with trainers and legal experts challenging opinions and sharing detailed experiences; a session which was truly insightful for all.

The course not only covered theoretical elements, it also encompassed a practical component for which a field visit to AFGRI’s silo in Bronkhorstspruit was organised.

The participants were received and welcomed by the silo manager, Mr Willie Pieters and his colleagues who took the participants through various operations at the very well-equipped and technologically enhanced silo. Only nine individuals run the plant visited and the company’s 84 silos and bunkers in southern Africa are all housed under the AFGRI Grain Management business which is a grain storage facility and handler. They however do not own or trade any of the products they handle.

The specific operations which were seen at the silo included grain receiving and sampling, which was noted as the single most important step in the process. Samples from every load of grain which is stored by the silo is tested thoroughly upon arrival and following departure. Offloading and stacking was also illustrated and participants were taken through the intricate process of caring for the grain during storage. AFGRI has perfected their grain storage operations and the handling thereof is a seamless process which is optimised by technology which provides on-the-minute reporting and risk management, backed by decades of experience and a staff complement which has truly earned their proverbial stripes in the industry.

The global explosion in trade volumes has been supported heavily by communication and technology, which has made it possible to share information from virtually anywhere globally on which grain is available to buyers and sellers alike. Africa currently accounts for nearly 30% of world-wide grain imports and the demand is still growing, with grain imports in sub-Saharan Africa expected to increase by 50% in the next ten years, also according to Rabobank.

The training on Structured Commodity Trade Finance has equipped recipients with information and a new-found understanding of the subject area which will assist them to steer through the highly specialised and complex transactions involved in commodity trade, amidst the disruptions which food production systems are facing which have unfortunately undermined confidence in global trade as a reliable mechanism for the delivery of food security.