Home News July fuel price hikes pinch agriculture industry

July fuel price hikes pinch agriculture industry

Increases erase the relief that lockdown brought to petrol, diesel prices

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The fuel price hike that hit South Africa today rolls back most of the price relief brought in recent months by the covid-19 lockdowns and the international oil glut. 

The latest increase drives the price of 95 Unleaded petrol up to R14,42 per litre at the coast and R15,12 inland, while the cheaper 93 ULP grade rose to around R14,32 at the coast and R14,83 inland. This is just 78 cents less per litre than this year’s price peak of R15,71 for 93 ULP just before lockdown. 

The price of 95 petrol increased by R1,72 per litre and 93 by R1.63 per litre, while diesel 0,05% increased by R1,73 per litre and 0.005% by R1.69 per litre. The price of illuminating paraffin is up by R2,14 per litre.

This means a tank of petrol will cost between R52 and R130 more, depending on what vehicle you drive.

Petrol users will be heavily affected by the fuel price hike as opposed to diesel users, because petrol is regulated fuel and must be sold at a specific price, says Layton Beard, spokesperson for the Automobile Association (AA). Diesel is unregulated and can be sold at any price. 

The fuel price hikes will be another blow to the agriculture sector, which is already struggling, said head of information and marketing at FNB Agriculture, Dawie MareeHe refers to the national lockdown which put produce prices under pressure and the drought that caused a massive reduction in crop quantity over the past few years.  

Mzansi’s citrus and summer grain farmers are already in harvest season and the fuel price hikes will have a negative impact on their profitability, he says.   

“Both citrus and grain are transported by means of roads. Should the fuel price increase, the farmer can’t increase his product price to the miller, because the miller still determines the price and the farmer is the price taker of that price. At the end farmers and consumers will have to absorb these increasing costs. 

“Small-scale farmers will be affected more than the commercial farmers because commercial farmers have bargaining power as opposed to a small-scale farmer who produces less,” he says. 

According to agricultural economist  Lunathi Hlakanyanewith every increase in fuel prices there will be a knock-on effect on the prices of farming inputs and transportation.  

Input costs are everything that go into production – your fuel, grain, pesticides, and anything that goes into producing any commodities a farm produces. And that obviously includes feed and medication if you are farming livestock.  

The coronavirus exacerbated farmers woes. Obviously in an industry that already has an oversupply of uncertainty and disruption, adding the fuel price hike you get a very bad mix. The coronavirus has tremendously compromised a lot of farmers and it has placed them in a very tight corner. 

He said that commercial farmers will be the hardest hit because their operations are massive and they are capital intensive. They also work with a lot of machinery that requires fuel, he says. 

Sinesipho Tom
Sinesipho Tom
Sinesipho Tom is an audience engagement journalist at Food for Mzansi. Before joining the team, she worked in financial and business news at Media24. She has an appetite for news reporting and has written articles for Business Insider, Fin24 and Parent 24. If you could describe Sinesipho in a sentence you would say that she is a small-town girl with big, big dreams.
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