South African fuel prices have been on an upward trend since August 2017, mainly driven by an increase in Brent crude oil prices, as well as a relatively weaker domestic currency. Next month, a notable uptick will be on diesel price which could be up 2% from the October 2017 price, whereas petrol might only increase by a mere 0.1%. This will add pressure on farmers as it coincides with the planting period in summer rainfall areas. Also worth noting is that, for grain and oilseed, fuel makes up roughly 11% of production costs, and a notable share is utilised during planting.
Diesel (0.05% Wholesale Inland) and petrol (95 ULP Inland) prices could increase by 21 cents per litre (c/l) and 1 (c/l) respectively, on 01 November 2017. This increase could lift the wholesale diesel price to R12.33 per litre from R12.12 per litre in October 2017. At the same time, the retail price of petrol could increase to R14.02 per litre from the current level of R14.01 per litre.
This expected fuel price increase is largely driven by relatively higher Brent crude oil prices, which averaged US$56.83 a barrel this month, up by 3% from September 2017. The ZAR/USD exchange also played a major role, after weakening by 3% from the previous month, averaging R13.55 at the time of writing.
Overall, the expected uptick in diesel prices will increase farmers’ and agribusinesses’ input costs, particularly in summer crop growing areas which have recently started planting the 2017/18 production season’s crops. As we set out in our previous fuel note, the agribusinesses that operate in the transport industry will also feel the pressure on input costs due to their exposure on road transport. An example of this is maize which has more than 80% stock that is transported by road.
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