SA's silo certificate system: safe and reliable

Silo certificates form an integral part of trading for those involved in South Africa’s grain industry, according to Johan Strauss, agricultural economy lecturer at the University of the Free State. In an interview with Annelie Coleman, he said the country’s silo certificate system was dependable and highly regarded.

- Johan Strauss

For the benefit of our readers who are not involved in the grain industry, can you explain what a silo certificate is?

It’s a formal document that serves as confirmation and evidence of the amount of grain delivered by a grain producer to, and held in storage by, a storage facility. It is a tradeable document that is used in South Africa for buying and selling grain commodities. Producers can sell grain based on silo certificates issued by storage providers, and buyers such as millers can purchase and pay for the grain-based on silo certificates provided by the seller.

After the transaction is concluded, the seller signs the certificate over to the buyer, and it then becomes the buyer’s property to be traded again or to obtain the physical grain from a silo. The certificate holder is responsible for storage costs. Silo certificates are issued for all commercially stored grains. The parties involved in a silo certificate transaction are the silo operators, buyers and sellers. Grain traders such as maize exporters seldom engage with primary producers; they deal with agribusinesses directly, as they do business on a totally different level to local buyers and sellers. Grain traders keep a keen eye on international trends and opportunities for trade, based on the selling price, the price offered by the potential buyer, and the exchange rate.

Does the market use the certificates to keep track of grain supplies at any given time?