Another petrol and diesel hike for the second consecutive month hit farmers and consumers this week, and it will negatively impact food production in the country. This comes hot on the heels of the bird flu outbreak and continuous power cuts.
First National Bank agricultural economist Paul Makube said the fuel hike is not good news for farmers who are using petrol and diesel respectively in their day-to-day operations.
It is tough for farmers
“This comes at the onset of heightened activity and fuel consumption in the agriculture calendar as planting of summer crops begins followed by harvesting of winter crops towards the end of the year. Fuel accounts for about 10% of the annual grain and oilseed variable costs,” he said.
The department of mineral resources announced a hike in fuel which kicked in on Wednesday with diesel grades increasing by R1.97 per litre and petrol to R1.94 per litre to highs of R25.02 per litre and R25.22 per litre.
“In the livestock and horticulture subsectors, fuel is critical for the transportation of produce to markets and recently a massive input in farm operations as well as cold storage facilities due to load shedding in South Africa.
“This has forced farmers to deploy the use generators in their farming operations such as irrigation, milking, abattoirs, and cold storage at huge costs during higher levels of load shedding,” he said.
Makube explained that fresh produce always requires maintenance of a cold chain, and any breakage of the process compromises the quality and safety of perishables such as fruit, vegetables, and meat resulting in potential huge financial losses for farmers.
Challenges on top of another
“With the poultry sector hit by the avian flu and the consequent disruption to operations in the industry, further fuel hikes are an additional financial strain for producers.
“The short-term outlook for fuel prices remains uncertain given the increased volatility of both the international Brent crude oil prices and the Rand/US dollar exchange rate,” he said.
Makube added that the rand on the other hand had recently extended losses and topped R19.32/US$, thus posing an upside risk to fuel prices.
“Higher fuel prices might dampen the consumer inflation outlook thus forcing the SARB to maintain elevated interest rates for a bit longer.
“Elevated debt serving costs for farmers have been a constraint for potential agriculture production expansion. Tight profit margins will limit the producers and processors’ capacity to absorb further cost pressures,” he said.
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