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With petrol prices set to soar to record highs this week, industries across South Africa are bracing themselves for the pinch.
Petrol and diesel prices will increase by 82 cents per litre for all grades, and diesel by 85 and 87 cents per litre for the for the two types (0.05% and 0.005% sulphur) respectively.
This means the 95 ULP petrol will reach a record high of R15.79 per litre and R15.20 per litre for the inland and the coastal areas respectively.
How will petrol prices impact on farming?
Paul Makube is a senior agricultural economist at FNB Agri-Business. He has been mulling over the upcoming hike and believes that this increase could see farming take a R1 billion hit during these lean times for motorists and workers.
As oil costs skyrocket, products which rely on crude – such as fertiliser and pesticides – suffer the knock-on effects. They also increase in value, exerting more pressure on the agricultural industry:
“It is estimated that a R1 per litre increase in fuel costs equates to a R1 billion increase in input costs per year to the agriculture sector. These costs manifest differently across the various industries from planting, harvesting, distribution and packaging.”
“The higher crude oil price is a double whammy due to the direct influence on the fuel price and the indirect influence on oil derivatives such as fertiliser, pesticides and herbicides all of which are inputs in crop farming.”
“The summer crop season has ended, and harvesting is in full swing with a total of 3.85 million hectares and an additional 500,500 hectares of wheat is currently being planted in the Western Cape.”
Will agriculture suffer in South Africa?
Makube, however, doesn’t believe that this means its all doom and gloom on our farms. Looking at the long-term forecast, he believes that the trade can weather the storm as Russia and Saudi Arabia are set to “boost their oil production”.
He expects a robust agricultural output for the 2017/18 season, coupled with large carryover grain stocks which should continue to provide some cushion for consumers in the short-to-medium term.