How SA farmers can protect profits amid surging input costs

Weather and yields used to be the main drivers of farm success, but rising input costs are taking centre stage in 2026. Nedbank’s Daneel Rossouw breaks down the economic forces currently shaping South African agriculture and how producers can strategically protect their bottom line.

Behind every successful farming operation lies a careful balance of energy, labour, and input expenses that determines a business’s ultimate survival.

Drawing on nearly 35 years of experience in agricultural funding, Daneel Rossouw, head of sales for agriculture at Nedbank, notes that the 2025–2026 period is shaping up to be one of the most complex economic landscapes the sector has faced.

Rather than a single isolated factor, farming operations are contending with compounding cost pressures across multiple critical fronts.

“Looking at 2026, the biggest cost pressures are currently coming from a combination of input prices, specifically talking about energy, labour, logistics, and finance, rather than one single cost,” Rossouw explains. “The severity thereof differs considerably by the commodity itself.”

Breaking down the core cost drivers

Among the primary inputs, Rossouw says fertiliser stands out as a massive pressure point, particularly for grain, oilseeds, sugar, and horticulture. Representing between 20% and 35% of input costs in standard grain systems, and considerably more in high-intensity operations, recent estimates put fertiliser prices up to 50% higher than the same period last year.

Because South Africa imports more than 80% of its fertiliser requirements, local prices remain tightly linked to global crude oil trends and exchange rate fluctuations.

Fuel presents a similar challenge. Diesel accounts for up to 15% of grain production input costs, and with roughly 70% of the country’s diesel imported, global oil markets directly dictate farm-level expenditure.

Beyond energy and fertiliser, other essential operational costs are climbing steadily:

Electricity and utilities: While load shedding has abated for an extended period, electricity tariffs continue their upward trajectory. This heavily impacts irrigated agriculture and high-value crops. While more farmers are investing in solar and alternative power systems, these solutions demand significant upfront capital expenditure.
Labour dynamics: Particularly crucial in high-value, labour-intensive industries like horticulture, wine, and sugar, labour costs involve more than basic wage inflation. Minimum wage increases, ongoing skill shortages, and variable productivity levels leave these sectors particularly vulnerable to margin compression.
Crop protection: Chemical active ingredients are heavily pegged to international commodity prices and the US dollar. Unlike discretionary farm expenses, cutting back on chemical applications directly elevates production risk, leaving little room to adjust spending.

Looking beyond weather and commodity prices

To navigate these pressures, Rossouw emphasises that producers need to broaden their financial monitoring beyond traditional indicators like current commodity prices and local rainfall.

Over the next 12 months, farm profitability will be driven by the dynamic interaction between macroeconomic forces.

He points to several critical variables that demand close attention:

Interest rates and inflation: While potential rate easing offers a beacon of relief, persistent inflation spikes could delay further rate cuts, keeping financing costs elevated.
Exchange rate resilience: The Rand has shown strong resilience recently, but currency markets remain inherently volatile and require ongoing risk management.
Geopolitical shocks: Fuel, oil, and fertiliser markets remain highly sensitive to international conflict and global supply disruptions.
Climate transitions: Early indicators and warnings of an El Niño cycle point to heightened production risks heading into the 2026 and 2027 seasons.
Municipal and infrastructure overheads: Rising municipal tariffs, water costs, and localised electricity constraints continue to limit expansion in high-growth, export-orientated regions.

Strategic planning for multi-season resilience

At its core, managing modern agricultural risk requires looking at the bigger picture and preparing for economic volatility before purchasing inputs or planting seeds.

As market conditions evolve, aligning with a financial partner who understands these macroeconomic shifts is essential for maintaining liquidity and structural stability.

To explore how Nedbank can partner with your agricultural business and support your strategic planning for the 2026–2027 seasons, contact business@nedbank.co.za or reach out directly to your regional Nedbank business manager.