Farmers should prepare to pay a record-breaking R22/l for wholesale diesel from the first week of May, Corné Louw, senior economist at Grain SA has warned.
“This will simply be adding fuel to the fire as it will be the third month in a row that the diesel price will be breaking every historically high diesel price. Prices have been rising since February,” Louw told Farmer’s Weekly.
Louw said petrol prices were likely to decline on Wednesday, 4 May, while the wholesale price of diesel was expected to increase from its current R21/l to around R22/l.
The timing of the increase could not have been worse for the industry. Farmers were currently harvesting maize, soya bean and sunflower in the summer planting region, while Western Cape farmers were planting crops such as wheat, barley and sorghum, Louw said.
“Fuel makes up between 13% and 14% of a grain farmer’s total running costs. When you consider this increase on top of record-breaking fertiliser and agro-chemical costs, the cost-squeeze has become nearly unbearable for many farmers.”
Whether farmers would still able to produce grain profitably was a relative question, Louw said. “It all depends on when producers bought their inputs.”
Western Cape farmers, for example, were only now buying inputs at sky-high prices. Although agricultural commodity prices were currently also very high, dryland farmers, in particular, could not yet predict “what grain prices will look like when they harvest”, he stressed.
“This entire equation has been further exasperated by the Ukrainian war,” Louw said, adding that any fluctuations in global crude oil prices and the rand’s exchange rate against international currencies could still impact the final fuel prices for May.
Consumers would, however, still benefit from the temporary reduction of R1,50/l in the general fuel levy for April and May. This limited the petrol price hike to around 36c/l last month, and that of diesel to R1,53/l.
At the time of publishing, reports indicated that the price of both octanes of petrol could decrease by as much as 34c/l on 4 May. Diesel prices were expected to increase around 67c/l to 71c/l. However, these prices were still subject to change.