Unless international oil prices decrease, and the rand appreciates, the price of fuel in the country will remain on an upward trajectory. Experts reckon there is very little farmers and consumers can do to save themselves from the fuel price crunch.
Wandile Sihlobo, chief economist at Agbiz, explains that the exchange rate, global oil prices and the Brent Crude oil price are factors that contributed to current record petrol and diesel prices.
Petrol has increased with R1.21 per litre and diesel with R1.48 per litre.
“Whether the Brent crude oil price will remain at higher levels or not, will depend in large part on the increase in production by the key producing countries like Saudi Arabia, so that’s something to watch within the oil producing countries,” he says.
Paul Makube, senior agricultural economist at FNB Agribusiness, says the sharp upswing in fuel prices, and snowballing input costs, will lower the agriculture profit position.
“Increased activity in terms of planting, transportation of production inputs, distribution of produce as in the case of horticulture and livestock, as well as harvesting will attract additional costs, which overall has the potential to trim the farmer profit outlook for the year ahead, despite the current strength in commodity prices,” Makube says.
Impact on the middle market and food inflation
Dawie Maree, head of information and marketing at FNB Agribusiness, also tells Food For Mzansi that farmers’ margins will go down as they head into the summer planting season and finish off winter crop harvests.
“Given the increase in international oil prices, we can also expect an increase in other input costs, especially fertiliser, herbicides and pesticides which is a durative of the Brent crude oil prices,” he adds.
The fuel price increase is furthermore expected to significantly impact Mzansi’s middle-market consumers and cause food inflation. This, according to Robert Gwerengwe, FNB’s middle market segment CEO.
Gwerengwe explains, “The nature of a fuel price increase is that it has a knock-on effect, so not only does travelling become more expensive but because we use fuel in a lot of transportation of goods in South Africa, those goods prices will also go up.”
Looking to the future
Christo van der Rheede, executive director of Agri SA, says farmers are currently having to contend with machinery that use internal combustion technology and engines, which require a lot of fuel. “Unless we change towards hybrid, battery or electricity-operated tractors, cars and trucks, we will not be able to save on fuel.”
He predicts that Mzansi will see a massive uptake of electric farm vehicles in the future but for now, farmers have to endure the steady rise in fuel price.
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