Stock up on diesel ahead of planting. This was the key message from Agbiz economist, Wandile Sihlobo, as forecasters estimated that diesel could increase by more than 60c per litre in December.
Sihlobo said current estimates suggested that diesel prices could increase 3% from the previous month, while petrol was expected to increase 5%. These increases were largely driven by a higher Brent crude oil price and weaker rand.
According to Sihlobo, the price increase was significant as fuel constituted 11% of all grain production costs. He urged those producers planting or harvesting in December to be proactive ahead of the anticipated 6 December fuel price increase.
“I would say they should rather stock now and make sure they have sufficient supplies because if they wait till later they may encounter problems,” he said.
Grain SA chairperson, Jaco Minnaar, who was preparing to plant his own crop in the coming weeks, said diesel was used most intensively during land preparation, and that most farmers had already prepared their lands for planting.
He said that if prices increased in December, it would continue the trend experienced over the last few months. “Last month we were up about 40c and the month before I think 60c so it has been coming for a few months.”
He added that fuel price increases did not only affect farmers, but also affected other people in the value chain, and would add pressure on already tight margins.
“Farmers are already struggling, and this will just place additional pressure on profitability,” he said.
The Central Energy Fund was scheduled to meet on 29 November, and the fuel price would be announced on 6 December. Sihlobo said inland diesel prices could increase by 63c/ℓ, while the inland petrol (95 ULP) price could increase by 74c/ℓ.