Weekly quotes

‘…it will essentially increase profit margins for producers as input costs decrease in the long run’ – Grain SA economist, Ikageng Maluleke, outlining how the decrease in fuel prices during December will benefit South African farmers

The drop in fuel prices earlier this month was not expected to benefit South Africa’s grain industry much, as most producers had already purchased fuel for the harvesting of winter grains and the planting of summer grains, according to Grain SA economist, Ikageng Maluleke.

“However, should the current downward trend continue, it will essentially increase profit margins for producers as input costs decrease in the long run. For petrol and paraffin users, this will have a positive effect on their disposable income,” she said.

South Africans experienced eight consecutive fuel price increases in 2018, which had a negative impact on consumers as well as the economy in general.

The price of both grades of petrol would decrease by R1,84/ℓ from the current inland prices of R17,08/ℓ for 95-octane and R16,85/ℓ for 93-octane. Diesel would decrease by R1,45/ℓ and R1,47/ℓ from the current inland prices of R16,38/ℓ (0,05% sulphur) and R16,20/ℓ (0,005% sulphur) respectively. Illuminating paraffin would cost R1,33/ℓ (wholesale) and R1,78/ℓ (retail) less.

“Contributing factors for this fuel decrease are the stronger rand against the dollar and rapidly declining international oil prices. There’s a possibility that the reductions might vary slightly as government could still reintroduce the slate levy, which is used to finance cumulative under-recovery by the industry,” Maluleke said.

Gerrit Roos, a grain producer near Belfast, welcomed the decrease, but said it had come too late to benefit farmers in the 2018/2019 season. Planting in Mpumalanga had largely been completed, and had been carried out at the high fuel prices. Fuel was a key input cost, constituting 12% of, for example, maize inputs.

“The high fuel prices markedly eroded profitability. The majority of grain is transported by road, which also has an impact on ultimate profits,” he said. – Annelie Coleman