Maize and citrus farmers who are currently harvesting will be hard hit by the predicted fuel price hike announced by the Automobile Association (AA). This is the view of Dawie Maree, head of agriculture information and marketing at FNB.
The AA predicts that petrol and diesel will increase by a massive 87 and 58 cents per litre, respectively, in the first week of August. This is a direct result of the weakening rand and recent unrest in parts of KwaZulu-Natal and Gauteng, said the AA.
Maree explains that farmers are currently in harvest season and greatly reliant on fuel to get the job done.
“Farmers are price takers, so whatever cost they incur from the high petrol price will not be transferred to consumers and that will leave them at a disadvantage. The petrol price hike negatively impacts farmers’ profitability.”
The AA also predicts a 47 cents increase in the price for illuminating paraffin. It says the daily Rand to US dollar exchange rate has spiked the petrol price as well as international oil prices.
Maree tells Food For Mzansi, “Another big contributing factor is, obviously, the exchange rate. We depreciated it over the past couple of weeks. The majority of our fuel is imported so international factors play a bigger role.”
This, in turn, directly impacts Mzansi farmers.
“It will affect all the [commodities] that are currently harvested, such as maize that is more or less on a finishing side. Citrus is also in the harvest season, so obviously the production cost has increased for those products on a farmer level.”
Volatility of the Rand
Grain SA economist Luan van der Walt says, usually, when the grain sector experiences fuel price hikes, it becomes more expensive to transport grain.
“So, the overall fuel prices will have a negative impact on the transport cost which is also negative for the industry as a whole,” he says.
Van der Walt tells Food For Mzansi that the Rand’s volatility does not make matters easier for summer grain farmers in the country.
“If the Rand depreciates, it usually supports our local grain prices. But, on the other hand, in the next two to three months, summer grain farmers will start planting again. So, the weaker Rand will increase the input cost again. It’s a bit of a balance between the two,” he says.
Meanwhile, Willem Pretorius, the president of Agri Gauteng, says the province is currently harvesting their maize with other commodities set to follow within the next two months.
“The fuel price hike will directly influence the agriculture community. There’s no two ways about it. The moment the fuel price increases, everything gets more expensive. All the practices on farms are running on fuel. All your tractors are running on diesel fuel,” he says.