AS South Africa heads into the new crop season, the latest fuel hike will be a major blow to agriculture.

This week saw a price hike of 5 percent month-on-month (m/m) for the two grades of petrol at R18, 11/ litre (US$1,26 for unleaded 93) and R18,30 (unleaded 95).

This is 22 percent and 21 percent higher respectively year‑on‑year (y/y).

The two grades of diesel will increase by 4% m/m and 16% y/y to R15,63/ litre (500ppm) and R15,66/ litre (50ppm).

The increase was underpinned by a combination of a 4,5 percent m/m rise in crude oil prices to $74/ barrel and a further 1,4 percent m/m depreciation in the Rand/ US dollar exchange rate to R14,54 in June 2021.

Paul Makube, the Senior Agricultural economist at First National Bank (FNB) Agri-Business, said this comes at a time when farmers were delivering a huge grain and oil-seed crop of 17,07 million to the country’s silos and gearing themselves for the onset of the 2021/22 planting season in just over a month’s time if rains permit.

“The availability of fuel at the right time and price is critical for a successful operation across the agriculture value chain, “he said.

“Not only fuel is impacted, but the cost of imported agriculture inputs such as fertilizer, pesticides, and herbicides will also increase especially given the recent constraints with the availability of ingredients to produce certain fertilizers and the higher cost of shipping.”

The harvested crop is meanwhile being transported to various storage bins across the country including the export markets.

“Therefore further fuel hikes will dent producer margins,” Makube explained.

Grain producers and logistics companies in the agriculture value chain will feel the pain, as closer to 80 percent of grain is transported by road.

Livestock and horticulture with citrus harvest in its infancy will also be affected in terms of distribution across the country, as well as exports.

“Mounting cost pressures will eventually erode producer margins and a potential inflationary pain on consumers,” Makube concluded. – CAJ News