South African fuel prices could increase further on 6 December 2017. While it is relatively early to be certain about the scale of the increase, the current estimates suggest that prices of petrol and diesel might increase by 5% and 3%. This is mainly driven by higher Brent crude oil prices, as well as a relatively weaker domestic currency.
The increase will add pressure on farmers as it coincides with the planting period, particularly in the western regions for summer crops, where the optimal planting window for grains and oilseeds only closes in early January 2018. As stated previously, fuel makes up 11% of grain production costs, and a notable share is utilised during planting.
Petrol (95 ULP inland) and diesel (0.05% wholesale inland) prices could increase by 74 cents per litre (c/l) and 63 (c/l) respectively, on 6 December 2017. This could subsequently lift the retail price of petrol to R14.47 per litre from the current level of R14.05 per litre – the highest levels on record in a dataset starting from January 2010. At the same time, the wholesale diesel price could increase to R12.75 per litre from R12.35 per litre in November 2017 – the highest levels since August 2014.
The price rise of inland diesel – from R11,42/ℓ to R12,12/ℓ since the beginning of 2017 – has had a cumulative effect on production input costs that has affected the profitability and sustainability of most SA farmers.
This is the view of TAU SA in response to news that the price of diesel could increase yet further in November 2017, rising 2% above that of October.
Wandile Sihlobo, Agbiz’s head of agribusiness research, reported recently that the inland wholesale price of 0,05% sulphur content diesel could increase by 21c/ℓ to R12,33/ℓ on 1 November.
This would be the fourth consecutive monthly increase in South Africa’s fuel price.
Corné Louw, senior economist on production inputs at Grain SA, said that, by comparison, South Africa’s diesel price in November last year had been R11,35/litre.
“As fuel constitutes more or less 10% of a grain and oilseed producer’s variable production costs, any increase will have an impact,” he said.
He added that Western Cape farmers were currently harvesting their winter grains while summer grain farmers elsewhere in the country were planting for the 2017/2018 production season. South Africa’s agricultural diesel usage was therefore currently high.