UPDATE: SA fuel prices set to decline in February 2018
Agbiz Morning Market Viewpoint on Agri-Commodities: 18 January 2018
January 18, 2018
South African Agricultural Commodities Weekly Wrap: 19 January 2018
January 19, 2018
After a positive start to the year with a marginal decline in fuel prices, February 2018 could bring a further reduction in fuel prices, thanks to the stronger domestic currency. It is still early to be certain about the scale, but the current estimates suggest that prices of petrol and diesel could fall by 3% and 1%, respectively, from January 2018 levels.
From an agricultural perspective, this relief comes at a period that is characterized by reduced activity in the farms, thus lower fuel consumption. Meanwhile, agribusinesses’ could experience an increase in activity, transporting commodities across South Africa. It is worth noting that roughly 81% of maize, 76% of wheat and 69% of soybeans in South Africa are transported by road. On average, 75% of national grains and oilseeds are transported by road.
Petrol (95 ULP Inland) and Diesel (0.05% Wholesale Inland) prices could decrease by 38 cents per litre (c/l) and 19 (c/l) respectively, on 07 February 2018. This means the retail price of petrol could decline to R14.04 per litre from the current level of R14.42 per litre. At the same time, the wholesale diesel price could decrease to R12.54 per litre from R12.73 per litre in January 2018.
This expected fuel price cut is mainly driven by the ZAR/USD exchange, after strengthening by 6% from December 2017, averaging R12.35 at the time of writing. Meanwhile, the higher Brent crude oil prices have somewhat reduced the scale of the potential fuel decline. At the time of writing, the monthly oil price averaged US$68.51 per barrel, up by 7% from December 2017.
Above all, the expected decline in fuel prices will slightly ease farmers’ and agribusinesses’ input costs. While there is relatively lower activity in farmlands, agribusinesses, particularly logistics companies, will experience an increase in activity owing to an expected uptick in wheat imports, as well as exports of summer grains.
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