A slight reprieve at the pump still positive for farmers

Comment by Paul Makube, senior agricultural economist at FNB Agri-Business

05 May 2021 – Fuel prices eased for the first time in 2021 on the back of a 2% decrease in international Brent crude oil prices and the rand strengthening by 3% in April relative to the previous month. As of today, petrol prices are 9 cents lower while the two grades of diesel fell by 34 and 30 cents respectively for the 0,05% and the 0,005% sulphur content.

The decrease is still small, but most welcome as farmers are harvesting the summer grains and oilseed crops and getting on with the planting of winter crops. Any reprieve at the pump is positive, as we head into increased activity in the agricultural calendar with high demand and consumption of fuel. This will help prevent further escalation in input costs across the value chains with varying impact on planting, harvesting, distribution, and packaging.

Close to 80% of grain is transported by road from farms to silos, to the various harbours, and milling areas across the country. This has an impact of profit margins of grain producers and logistics companies in the agriculture value chain.

Horticulture with citrus harvest in its infancy will also be affected with respect to distribution across the country and for exports. Livestock producers face cost pressures as they transport animals from production areas and finally to slaughterhouses. Moreover, the prices of inputs such as fertiliser, herbicides, and pesticides are highly influenced by the levels of both the crude oil prices and the rand exchange rate. The current developments of rand strength and easing of international crude oil prices will hopefully persist and provide the much-needed relief for farmers and consumers and further contribute positively to containing inflation.