Farmers who are on the verge of harvesting winter crops, are especially pleased with the fuel price drop expected from Wednesday this week. Agricultural economists warn, however, that farmers need to plan ahead and protect their farming businesses from the possibility of future spikes in fuel prices.
According to information released by the Central Energy Fund, the price of 95-octane unleaded petrol is expected to fall by around R2.35, while 93-octane petrol will drop by R2.18 per litre. The diesel price is set to go down by 77c to 87c per litre.
Agri Western Cape economist Daniël Minnaar says that this is a welcome shift in the price of fuel, particularly for winter crop farmers.
“Winter crop producers will be hoping that the fuel price continues to drop in the coming months [as] the harvesting of canola, wheat and other winter grains is around the corner,” he says.
As an example, he says that a winter grain producer can use between 16 to 23 litres of fuel per hectare when harvesting. When there are upward fluctuations in fuel prices, the production costs of farmers are significantly impacted.
The Western Cape is where more than two-thirds of South Africa’s winter crops are planted.
R12 billion for fuel, electricity and fertiliser
Tshepo Morokong, senior agricultural economist in the Western Cape’s department of agriculture, says that data indicates a rise in the agricultural sector’s expenditure on fuel, fertilisers, and electricity.
“In the first quarter of 2022, the agricultural industry for the entire country spent around R12.4 billion on intermediate good such as fuel, electricity and fertiliser combined. The combined amount spent on these three intermediate goods increased by 7% when compared to the same quarter in 2021,” Morokong says.
Meanwhile, AA spokesperson Layton Beard says that a further price decrease is good news for consumers who are financially strained. He believes, however, that it will be a while before grappling motorists will recover from price hikes in previous months.
“We remain concerned about overall high prices, which impact on all consumers. The price hikes in June and July will continue to impact the economy, and on the financial situation of all South Africans.”
He believes a sustainable solution to mitigating rising fuel costs remains necessary. Until a solution is found, citizens will continue to be at the mercy of fuel price hikes.
Farmers need more money to spend elsewhere
Because it is difficult to forecast what fuel prices will look like for the rest of the year, some economists advise farmers to take advantage of the fuel price cuts and buy in bulk.
O’Brien Perel, who is also a senior agricultural economist at the Western Cape department of agriculture, tells Food For Mzansi that if prices were to remain relatively high towards the end of the year, producers would be wise to buy certain production inputs in bulk.
Pointing to fertiliser and diesel in particular, Perel says that buying these inputs in larger quantities could mean that farmers have more money to spare and to use somewhere else later on.
“It would be good for farmers to store up diesel if they have sufficient diesel tanks.”
While some farmers might have the financial muscle to do this, those who cannot, can rather explore other fuel reduction strategies.
Mzwanele Lingani, another economist at the department, says that farmers can try small but practical things that could add up to savings that do make a difference. Among other things, farmers can purchase fuel-efficient vehicles, especially if 4×4 vehicles are not a must-have, or reduce the number of trips for production inputs, for instance.
The Road Freight Association, meanwhile, says that any decrease in the cost of fuel will have a tremendous positive effect on transport costs and supply chains.
“Whilst the price of fuel has dropped, the effects into the logistics chain should be felt in the coming quarter and will certainly make life slightly easier for consumers towards the end of the year.”
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