Fuel spike piles pressure on agro sector

Grape fields in South Africa

by AKANI CHAUKE
JOHANNESBURG, (CAJ News) THE rapid increase in the price of fuel is putting pressure on agriculture input costs as South African farmers harvest last summer’s crop and prepare for the winter planting season.

This trend is attributed to the global developments as Brent crude oil prices rose by 6,7 percent month on month in April 2021 to average US$64/ barrel.

The rand exchange rate depreciated by 1,3 percent to R14,95/$1 during the same period.

“This comes at an unfortunate time with the onset of the winter crop planting season and summer crop farmers gearing themselves for the winter harvest,” said Paul Makube, Senior Agricultural economist at FNB Agri-Business.

He noted South Africa was heading into increased activity in the agriculture calendar and demand and consumption of fuel was expected to increase in the medium term.

“The escalation in fuel costs does not bode well for producers as production costs are likely to escalate across the value chains, with varying impact on planting, harvesting, distribution and packaging.”

Grain producers and logistics companies in the agriculture value chain will bear the brunt as close 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 and for exports.

Moreover, the prices of derivatives of crude oil processing such as fertilizer, herbicides and pesticides are likely to increase should the recent uptrend persists.

The latest developments are a dampener to the revival of the sector.

The Department of Agriculture, Land Reform and Rural Development (DALRRD) this week released the 2020 trade performance review that sheds light on South Africa’s trade performance of agricultural products, relative to the prior year.

Agricultural product exports increased by 18,1 percent in value terms.

The leading products exported were fruits and nuts.

Cereals exports recorded the highest growth rate of 98,3 percent for the year, coinciding with the second-largest maize production.

– CAJ News

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