Farmers brace for potential diesel price hike in August

By Octavia Avesca Spandiel | 23 July 2024 | 12:49 pm

South African motorists are cautiously awaiting news on August fuel prices, with predictions leaning towards a slight decrease for petrol and a possible increase for diesel.

South African farmers, reliant on diesel for machinery and transportation, are bracing for a potential price hike in August.Photo: FW Archive

This price fluctuation has sparked concerns, particularly for the agriculture sector, which heavily relies on diesel for operations.

Automobile Association (AA) spokesperson Layton Beard shed light on the fuel price adjustment process.

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“Fuel prices are only adjusted once a month. The Central Energy Fund releases daily numbers that indicate the fuel price on that specific day. These figures are averaged at the end of each month to determine the adjustment for the following month.”

Beard emphasised the critical role diesel plays in agriculture. “Diesel is a major input cost for many sectors in South Africa, including agriculture. Farmers need it to run machinery, transport goods across vast distances, and keep their farms functioning. A rise in diesel prices would force them to raise their own prices to recover these additional costs,” he said.

This price increase could have a domino effect, ultimately impacting consumers. “Imagine eggs costing R5 for R6 this month. If a farmer spends more on diesel due to a price hike, they’ll need to factor that extra cost into their pricing. This translates to higher prices for consumers across the board, affecting everything from basic groceries to manufactured goods.”

Chief economist at Agbiz, Wandile Sihlobo, offered a more nuanced perspective: “August is a relatively quiet period for South African agriculture. While we begin preparing for summer crops in 2025, the harvest season for winter crops won’t gain momentum until later this year. A slight diesel price increase in August wouldn’t put significant pressure on the sector as a whole.”

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He acknowledged the concerns of agribusinesses involved in logistics. “Transportation costs would be impacted by a diesel price hike. However, given the current quiet period, we’re not overly worried about these slight fuel adjustments. In fact, a potential decrease in gasoline prices would be welcome news.”

Sihlobo highlighted the importance of farmers understanding these economic fluctuations.

“Farmers are very aware of the impact fuel price changes have on their businesses. The challenge lies in finding ways to mitigate these effects. Some might explore native energy sources like biofuels, but that depends on individual circumstances,” he said.

While the potential August price increase might not significantly disrupt the current agricultural cycle, industry experts warn of long-term consequences.

“Frequent fuel price fluctuations make it difficult for farmers to plan and budget effectively. This uncertainty can discourage investment in new technologies and hinder the overall growth of the agricultural sector,” Sihlobo said.

The potential impact of rising fuel prices on both agriculture and consumers underscored the need for government intervention.