The increase in fuel prices that takes effect tonight comes at a bad time for farmers in the summer rain area for whom planting time has arrived, as well as for farmers in the winter rain area who are harvesting. This is the first rise in fuel prices since May, with prices falling since then.
Diesel with a sulphur content of 0.05% rises by 21c/litre and diesel with a sulphur content of 0.005% rises by 20c/litre. The petrol price increases by 25 c/litre.
Dawie Maree, head of Agriculture Information and Marketing at FNB, says for every cent the diesel price rises, it is an increase of around R10 million in agriculture’s direct costs. “It is therefore a substantial increase, especially with the start of planting time in the eastern parts, and farmers in the west who are just waiting for rain before they start planting. This is therefore a period of high diesel consumption for summer grain farmers.
“In the winter rain area, farmers are harvesting, but the harvesting process does not require that much more diesel than normal. Nevertheless, the price increases have a direct impact on farmers’ production costs. There are also indirect costs, such as the transport costs of fertiliser and seed that must be unloaded on the farm. So this is not the best news that farmers want to hear now.”
According to Maree, one consolation is that most of the large consumers of diesel have probably already purchased and paid for their diesel for planting time. Rather, it is the smaller farmers who will be worst affected.
Prof Johan Willemse, independent economist, says the crux of the matter is that any increase in input costs comes from the farmer’s pocket. “The farmer’s product price is determined by the market and there is no way he can pass on costs. The previous big price increases seriously hurt farmers’ margins and we are still not back to where they were. Now it is rising again and it only puts farmers under further pressure.”
Wandile Sihlobo, chief economist of Agbiz, says given the planting season, the increase is a cause for concern. “Fuel costs make up about 13% of a grain farmer’s input costs, which is significant. Any increase in fuel prices, even if it is not big, is never good news.”
The increase can be attributed to the price of Brent crude oil, which rose from $72.82 to $75.07 per barrel in the review period. Although the rand strengthened slightly against the dollar (R17.68 to R17.53), it was not enough to offset the upward movement of international fuel prices.
