He says agricultural input costs have been relatively contained compared to this same period last year. Data from Grain SA shows in September 2018, South African farmers faced an average 20% year-on-year (y/y) increase in fertiliser prices and over R1 per litre increase in the diesel price.  

The local fertiliser prices, this year, were however down by 9% y/y on average in August 2019. Admittedly, this does not put absolute fertiliser prices at levels prior to August 2018, but it is a much welcome relief given that farmers are financially constrained after a drought season. The herbicides and insecticides prices are also down compared to levels seen in August 2018.

He adds that even though South Africa imports about 80% of its annual fertiliser consumption and is a small player in the global market, accounting for a mere 0.5%, local prices tend to be influenced by developments in the major producing and consuming countries, such as India, Russia, the United States and Canada. Last month, global fertiliser prices fell notably, partly due to a supply glut. The same is true for insecticides and herbicides. The decline in global prices has been an underpinning driver of slowing domestic prices. 

Together with that, the only diverging input price is fuel. After some increases at the start of September, daily data from the Central Energy Fund suggest further potential mild increases of 8 cents/litre for petrol and 19 cents/litre for diesel in October this year. This is on the back of an uptick in Brent crude oil prices, which were exacerbated by the recent attacks on a Saudi Arabian oil facility. Although this will not offset the benefits that South African farmers gained from declining fertiliser, herbicides and pesticides prices, it will add slight pressure. The impact will also extend to the agribusinesses that operate in the transport and logistics industries. On average, 75% of SA’s national grain and oilseed crops are transported by road, says Sihlobo.

Here is Sihlobo…

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