2013 set to be an expensive year

The retail petrol price jumped 41c/l and the wholesale diesel price by 17,8c/ l on 6 February, mainly because of a weaker rand and higher global oil prices.

- Advertisement -

The increase signalled a bad start to the year for agriculture and was expected to lead to attrition in the industry.
“The new fuel price means a fuel expenditure increase of R118 million/annum for farmers who are facing a huge increase in administered prices, with electricity expected to go up between 10% and 16%, the minimum wage increase to R105/ day and higher water tariffs. We must not expect a very good year for farmers,” said Agri SA chief economist Dawie Maree.

Farmers faced other input cost hikes, linked to a weaker rand, such as higher prices on imported soya bean oilcake, fertilisers and tractor spare parts. On the flip side, export markets for agricultural goods were not as readily available as in the past, said Maree.

“Profitability will be under heavy pressure. Until supply and demand became more favourable, farmers cannot transfer price increases down the value chain. We might see farmers leaving the sector. Economies of scale will still rule and smaller farmers will sell out to bigger neighbours,” Maree said.

- Advertisement -

Canegrowers communications manager Jayne Ferguson said fuel and lubricants currently accounted for between 6% to 7%, and transport costs between 14% and 15%, of total operating expenditure in the sugarcane industry. “Producers are sensitive to fuel price changes. The fuel price increase will also contribute to price inflation for all farming requisites,” Ferguson said. Further fuel price increases could be on the way in March, given that crude oil has been steadily pushing towards US$116/barrel while the rand remains weak.

The Automobile Association of South Africa (AA) said increases to the fuel levy in March were likely to be announced in the minister of finance’s budget. “This will further add to the cost of motoring and the transportation of commodities. From a transportation point of view, 2013 is set to become a very expensive year. Indications are that not only will the cost of fuel be higher this year, but the increased cost of vehicle licencing and toll fees will significantly add to the transport burden,” said Gary Ronald, AA head of public affairs.