Fuel hike adds pressure on SA agro sector


Petrol pump

JOHANNESBURG, (CAJ News) – THE rising fuel prices are likely to add cost pressures on the South African farming sector.

Lower oil prices had kept agricultural input costs at reasonably lower levels in 2020.

“But this year will not be the same,” said Wandile Sihlobo, chief economist at the Agricultural Business Chamber (Agbiz).

He noted the brent crude oil price has recovered from lower levels last seen this period last year when the coronavirus pandemic hit the world.

There was heightened uncertainty about the economic conditions.

Last Thursday however, the brent crude oil price was up by 125 percent year-on-year, trading around US$63,48 (R940,65) per barrel.

“South Africa is an importer of oil and fertilizer, and therefore at the cold-face of these price increases,” Sihlobo said.

He said the costs would be reflected in the diesel and fertilizer prices for South African agriculture and the agribusinesses sector.

The domestic agricultural industry is approaching a high consumption period for both fuel and fertilizer amid the planting period for winter crops and harvesting for summer crops.

According to the expert, fuel generally accounts for between 11 percent and 13 percent of grain production costs, while fertilizer constitutes about 35 percent of grain farmers’ input costs and a significant share in other agricultural commodities and crops.

In addition, on average, 75 percent of national grains and oilseeds are transported by road.

“While grain transporting occurs throughout the year, the harvest period is hectic and involves increased fuel consumption,” Sihlobo said.

Paul Makube, Senior Agricultural Economist at FNB Agri-Business, meanwhile said the agricultural sector can reap rewards from alternative energy.

This as South Africa contends with recurrent power cuts.

Makube explained power outages had a negative impact on businesses with warehouses, processing plants, canning factories, cold storages and those reliant on irrigation.

“Farming operations and seasonal planning have been disrupted by repeated outages,” Makube said.

Despite the outbreak of the COVID-19 pandemic and the lockdown in South Africa, the agricultural sector has been a standout performer, shipping about R150 billion (US$10 billion) worth of produce in 2020 or 3 percent more than in the previous year.

– CAJ News



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