KEEP UP TO DATE WITH ALL THE IMPORTANT COVID-19 INFORMATIONCOVID-19 RESOURCE PORTAL

FANews
FANews
RELATED CATEGORIES
Category Economy
SUB CATEGORIES General |  Budget 2017 |  Budget 2018 |  Budget 2019 |  Budget 2020 |  Budget 2021 | 

Fuel price increases not good news ahead of the onset of winter crop plantings

01 March 2021 Paul Makube, Senior Agricultural Economist at FNB Agri-Business

In just over a month’s time, farmers will be preparing themselves for the onset of the winter crop planting season.

Farmers planted just over 751,000 hectares under wheat, barley, canola and oats and this is likely to increase for 2021 given the relatively favourable seasonal outlook. Although on-farm agricultural activity is currently at a seasonal low except for distribution of produce, harvesting of record summer grains is around the corner. Against this background, demand and consumption of fuel is expected to increase in the medium term and the recent uptrend in crude oil prices does not bode well for producers as production costs are likely to escalate. Brent crude oil prices recently breached the US$60/bbl. and peaked at a high of US$65/bbl. in February 2021 which is 19% and 18% higher relative to the January 2021 and February 2020 averages respectively.

A surge in international crude oil prices more than offset the stronger rand exchange rate and will see the March prices of diesel and petrol increasing by about 66 and 57 cents per litre respectively. Adding fuel to the fire were the increases of 15 and 11 cents per litre in the general fuel levy and the Road Accident Fund levy respectively in the 2021 National Budget.

Activity in the agriculture space is expected to increase in the medium term and with upside risks to crude oil prices not dissipating, cost of production across the value chains that manifest differently from planting, harvesting, distribution and packaging are likely to escalate. Grain producers and logistics companies in the agriculture value chain will feel the pain as closer to 80% of grain is transported by road. Livestock and horticulture will also be affected in terms of distribution across the country and for exports. Moreover, the prices of derivatives of crude oil processing such as fertilizer, herbicides and pesticides are likely to increase should its recent uptrend persist. Hopefully, the rand will maintain the current momentum and strengthen to limit further fuel price increases.

Quick Polls

QUESTION

Covid-19 may accelerate certain industry trends. What are we likely to see?

ANSWER

Adoption of contactless technologies and digital experiences will likely be accelerating emerging technologies further
The consumer will expect safety and precautionary measures, driving the need for enhanced surveillance policies and technologies, which may pose potential privacy concerns
Rising activism among consumers and employees could drive an increased focus on corporate purpose
Value chain disruption is likely to lead to an increase in creative partnerships, which may in turn cause organisations to further invest in developing the mindset and agility to collaborate across sectors in the ecosystem
Cost management will be a critical priority to ensure business continuity based on cash flow requirements, to manage lower margins and revenues during a downturn
fanews magazine
FAnews April 2021 Get the latest issue of FAnews

This month's headlines

Randsomware attacks... SA businesses' biggest risk
Know the difference - compliance vs ethics
Better business by virtue of Beethoven
The future of vaccines
Harmonisation of retirement funds
Call centres and the maze of auto-prompts
The next 18 to 24 months are going to be tough
Subscribe now