Rising fuel, fertiliser costs threaten SA food prices, farmers warn

Rising costs of diesel and fertiliser could lead to a serious risk of a sharp rise in food prices, farming groups have warned.

These costs are likely to affect the harvesting of the summer grain crop, as well as the planting of the winter crop. The increase will be passed on through the agriculture value chain.

AgriSA and Agbiz said fuel, mainly diesel, accounts for 12%-18% of production costs.

The retail price of diesel soared to about 32.5% at the start of this month as the Middle East war sent global oil prices skyrocketing.

The government later cut the general fuel tax levied on each litre of petrol and diesel by R3.

Farmers are expecting another increase in the diesel price in May, which could push it to R40 per litre, said Jolanda Andrag, COO of AgriSA, a leading representative body for commercial farmers and agricultural businesses.

“We’re going into the planting season for the winter grains down in the Western Cape, in particular, wheat. So this comes at the most unfortunate time in terms of the production cycle,” Andrag told Business Day.

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“The reality of the food system is that it’s priced entirely in fuel. So it’s not just farmers; it’s the entire food system and everyone will start absorbing these costs, and ultimately it will start having an impact on food inflation.

“It’s not an availability challenge we’re sitting with. The real challenge is that we sit with food on shelves that’s priced out of reach, implying that food cost is so high that general consumers won’t be able to afford it.”

Adding to farmers’ pain is that South Africa imports most of its fertiliser — about 80% — from countries such as Saudi Arabia, Qatar, Oman, Russia and China.

The real challenge is that we sit with food on shelves that’s priced out of reach, implying that food cost is so high that general consumers won’t be able to afford it.

—  Jolanda Andrag, COO of AgriSA

Disruptions to shipping routes linked to the war are pushing up prices just as the winter farming season gets under way.

“South Africa is an arid country … with only 14% of arable land…. So from a productive perspective … if you do not use fertiliser, you will run into lower yields,” Andrag said.

Winter cereal producers will start to plant in mid-April. In the Western Cape an estimated 13,048,480 litres of fuel will be used for planting, she said. In the north of the country, harvesting of summer crops will start in a week or two and could take up as much as 98,208,721 litres of diesel.

Rising input costs and logistical delays could reduce yields, raise food prices and squeeze margins across the sector, said Sanele Nkosi, head of agriculture at BDO South Africa.

“For farmers, it’s not always easy to pass on those costs to the consumer. They will try, but ultimately, the biggest player who can impact that is the retailers. Farmers feeling this pinch are going to have to try and react,” he said.

“These are things that will be considered by every single farmer that’s operating in the country, especially the small-scale farmers, because they are obviously going to be impacted quite heavily from a cash flow perspective.

“Agriculture relies on quite a long lead time of planning: six to 12 [or] 18 months. So if you are planning your planting cycles six, 12, 18 months in advance, you are also planning your cash flow requirements in line with that, and a massive 30% increase in your input costs is going to impact how you are going to plan the rest of your season going forward.”