The projected ‘sharp increase’ in fuel prices early in September will have a direct impact on the agricultural sector in South Africa as cost of production and transportation will increase – and it may go as far as impacting retail and export prices.
So said Dawie Maree, head of information and marketing at FNB Agriculture, highlighting that information from the Central Energy Fund (CEF) showed an under-recovery of between 57-60 cents/litre on petrol and 47-49 cents/litre on diesel.
“The combined depreciation of the exchange rate and increase in the international price of crude oil and commodities has led to a situation where if the cost of fuel remains the same, fuel distributors in South Africa will essentially be trading at a loss or in economic terms, experience an under-recovery. To avoid this, prices will have to increase,” he explained.
Maree pointed out that for the agricultural sector, September was the start of the seedbed preparations in the eastern parts of the maize-growing areas of South Africa. “Farmers will have to increase spend on diesel, one of the major input cost lines for a grain farmer, due to a higher price. Secondly, the transport of agricultural inputs, such as fertilisers and seed will also be negatively impacted,” he said.
