The latest fuel price hike couldn’t have come at a more tricky time for the agricultural sector. Not only are citrus farmers currently harvesting, but grain farmers are also taking the last steps towards the planting season.
FNB public relations consultant Sam Mashele says, “This comes at a time when farmers are busy delivering a huge grain and oilseed crop of 17.07 million to the country’s silos and gearing themselves for the onset of [next year’s] planting season in just over a month’s time, if rains permit.”
Since Wednesday, petrol and diesel is now costing 87 and 58 cents more per litre. According to Mashele, this comes down to a 5% month-on-month hike for the two grades of petrol. On a year-on-year basis, this is up to 22% higher.
“The increase was underpinned by a combination of a 4.5% month-on-month rise in crude oil prices to US$74 per barrel and a further 1.4% month-on-month depreciation in the Rand-US dollar exchange rate to R14.54 in June 2021,” says Mashele.
He adds that the availability of fuel at the right time and price is critical for successful operations across the agriculture value chain.
Not only fuel is impacted, but the cost of imported agriculture inputs such as fertiliser, pesticides and herbicides will also increase, especially given the recent constrains with availability of ingredients to produce certain fertilisers and the higher cost of shipping.
Feeling the pinch
The harvested crop is also being transported to various storage bins across the country, including the export markets. Therefore, further fuel hikes will dent producer margins.
Mashele says, “Grain producers and logistics companies in the agriculture value chain will feel the pain, as closer to 80% of grain is transported by road.
“Livestock and horticulture with citrus harvest in its infancy will also be affected in terms of distribution across the country, as well as exports. Mounting cost pressures will eventually erode producer margins and a potential inflationary pain on consumers.”