Agri Hour

Agriculture profit outlook negatively impacted by high fuel prices

───   ELSABÉ RICHARD 05:30 Thu, 02 Dec 2021

Agriculture profit outlook negatively impacted by high fuel prices | News Article

Farmers’ profit margins are gradually shrinking due to high fuel and fertilizer prices, amongst others.

This week, the Department of Mineral Resources and Energy announced that the petrol price will rise by 75 cents per litre, while the two grades of diesel will increase by 72.5 and 74.5 cents per litre, respectively. 

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Dawie Maree, Head of Information and Marketing at FNB Agribusiness, talks about the impact that the record-high fuel prices will have on Agribusinesses. He emphasises that record-high fuel prices will have a negative impact on the profit outlook for agriculture.

He highlights that South Africa is currently amidst its summer grain planting season, and another announcement of fuel increases will increase farmers’ production costs dramatically.

“The indirect effect on other input prices will also negatively affect our farmers in terms of transport costs for inputs like fertiliser, herbicides and pesticides – which also saw record increases recently,” says Maree.

He says high fuel prices will also dampen the food inflation outlook, which has so far been relatively contained under the 5% level since October 2018.

Furthermore, Ester Ochse, Product Head of FNB Money Management, unpacks the impact of the hike on consumers and gives some tips on how to use money wisely as prices increase.

She says the latest increase in fuel prices will affect consumers’ pockets negatively. However, Ochse says this is a good time to look at ways to free up cash flow. Her advice to consumers is to “look at where your spending is going and see if there is some unconscious spending that is happening that you cut back on.

“Check your budget as well…and see if there is something that you can cut back on and redirect that money to something like travelling and your fuel spend as well,” advises Ochse.

Meanwhile, OFM News reported yesterday that the Department of Minerals and Energy has confirmed that the price of petrol for December was over-calculated by six cents a litre.

That meant that the December price at the pumps will be 75 cents a litre more, and not 81 cents a litre more as was previously stated.

The department spokesperson, Robert Maake, says all role players have been alerted to the error. He says the error was picked up in terms of the wage allocation for petrol attendants in the fuel price which had already been factored in back in September.

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