Categories: South Africa

Knock-on effect of record diesel price on grain value chain

The latest 87c/ℓ increase in the wholesale price of diesel will have a significant knock-on effect on the South African…

The latest 87c/ℓ increase in the wholesale price of diesel will have a significant knock-on effect on the South African grain value chain, according to Corné Louw, a senior economist at Grain SA.

The increase will take the diesel price to a national record high of R14,21/ℓ.

Louw added that most of the country’s grain production inputs were imported and were often transported from ports of entry by diesel-powered trucks, placing upward pressure on these prices over time.

READ Farmers, forget about price!

“This goes for grain-based food prices as well. We are currently at a low level when looking at food price inflation because of very low grain and oilseed prices. But because this produce must be transported around the country, it could negatively impact the downward trend in food price inflation,” Louw said.

He added that the more immediate impact of the record diesel price would be on grain and oilseed producers, who were currently harvesting their 2017/2018 summer crops.

READ Tips for stress-free livestock transporting

The harvesting process typically accounted for 30% to 40% of farmers’ diesel usage.

A statement released by Agbiz attributed South Africa’s June fuel price increases to a combination of the higher international Brent crude oil price and a relatively weaker rand against the US dollar.

“It is worth noting that 81% of maize, 76% of wheat, and 69% of soya bean in South Africa are transported by road.

READ Transporting produce in SA – yesterday, today and tomorrow

“On average, 75% of the national grain and oilseed production is transported by road,” the statement said.

Louw said the profitability of grain and oilseed producers was already “under severe pressure”, primarily due to “low” national and “very low” international prices at present.

He explained that one way for farmers to reduce their production costs was to implement conservation agriculture practices, which significantly reduced on-farm diesel consumption.

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