Big diesel price drop brings input cost relief for farmers

Big diesel price drop brings input cost relief for farmers
South African farmers who typically operate on tight profit margins have welcomed the drop in the diesel price of between 90c/ℓ and 93c/ℓ for October. Photo: AFGRI

As things stand, South Africa’s summer crop farmers who hope to benefit from the significant drop in the diesel price from midnight on Tuesday, 6 October, are unlikely to have their orders interrupted or delayed.

This was according to Grain SA’s senior economist, Corné Louw, who said that he had not received any reports of diesel production and supply concerns from the South African Petroleum Industry Association (SAPIA), or from the road freight industry.

An announcement by the Minister of Mineral Resources and Energy, Gwede Mantashe, indicated that the wholesale diesel price was set to drop 90c/ℓ for diesel with 0,05% sulphur content, and 93c/ℓ for diesel with 0,005% sulphur content.

Mantashe said that these decreases were due to the combination of the rand’s average appreciation against the US dollar, a drop in the average Brent Crude oil price, and the decline in average international prices for refined fuels.

The Automobile Association of South Africa reported that new inland wholesale prices for diesel would be R12,37/ℓ (0,05% sulphur) and R12,40/ℓ (0,005% sulphur). The new coastal wholesale prices would be R11,77/ℓ (0,05% sulphur) and R11,80/ℓ (0,005% sulphur).

“As national lockdown restrictions have eased, all has been running smoothly with South Africa’s fuel refining and distribution since August. Unless any unexpected major problems occur, our farmers should be able to [meet] all of their diesel needs,” Louw said.

He added that the diesel price drop would be welcomed by farmers who were still preparing their lands for planting summer crops, and by those who intended planting during the course of October.

“Diesel comprises about 13% of grain farmers’ variable production costs, and represents a significant expense compared to all of their other variable production costs.”

Egon Zunckel, a summer grain farmer in KwaZulu-Natal and the eastern Free State, welcomed the diesel price drop because like most other farmers, he said he typically worked on a tight profit margin.

“A decrease of 90c/ℓ adds up to big savings over a large production area. We haven’t had any recent problems with our diesel orders and deliveries. We try to keep updated on anticipated diesel price movements, and if the fuel companies’ expectation is for the diesel price to increase again in November, we’ll buy in and store as much diesel as possible at this month’s lower price,” he said.