Fuel price volatility reshapes farm risk

South African farmers are no strangers to volatility, but the current pressure around diesel is hitting at the heart of daily operations.

While there is no nationwide diesel shortage, supply constraints in some regions, combined with steep price increases, are tightening margins at a time when many producers are already under strain from extreme weather conditions coupled with rising input costs.

Diesel is one of the biggest operating expenses on a farm, accounting for roughly 15% of operational costs. It powers almost every stage of production, from planting and spraying to harvesting and transport. The impact stretches far beyond tractors and harvesters. Fertiliser, seed, and harvested produce all rely on road or rail freight, meaning fuel increases ripple through the entire agricultural value chain.

The latest increases have been particularly severe. Diesel rose by more than 32% in April, followed by another jump of R5.27 per litre in May, pushing prices above R32 per litre in some areas. For many farmers, the timing could hardly be worse. Excessive out-of-season rain in parts of Free State, North West, and Mpumalanga delayed harvesting, leaving producers racing against both the weather and escalating operational costs.

Kobus Stapelberg, Head of Agri Insurance at King Price Insurance, says fuel is not just another expense on a farm: “It affects every decision a farmer makes, from logistics and labour to how often machinery moves and how efficiently operations are planned.”

One of the major concerns is that fuel-related disruptions are uninsurable. Crop insurance typically covers risks such as hail, drought, or excessive rainfall, but delays caused by fuel supply interruptions fall outside the scope of insurance.

This reality is forcing farmers to focus more closely on controllable risks. Stapelberg says better planning and sharper operational discipline can make a meaningful difference. “Risk management becomes critical during periods like this,” he explains. “There are factors farmers cannot control, like rainfall or global oil prices. But there are also manageable risks, especially around vehicle usage, driver behaviour, and operational planning.”

Vehicles alone make up roughly 50% of the average monthly agri insurance premium, which means transport-related risk management has a direct impact on costs. Encouraging safer driving, reducing unnecessary trips, and improving oversight of vehicle usage can all help reduce claims exposure and operational expenses simultaneously.

This is one of the reasons why usage-based insurance models are attracting growing interest in the agricultural sector. King Price’s ‘pay as you farm’ offering was developed specifically for South African farming conditions and is increasingly being taken up by farmers looking for practical ways to cut costs without sacrificing cover.

The model uses GPS tracking to monitor when insured vehicles are being used and when they are standing idle. Farmers can access this information in real-time, allowing them to make faster operational decisions. The second benefit comes later, in the form of an annual rebate linked to actual vehicle usage.

According to Stapelberg, farmers using ‘pay as you farm’ are currently saving between 27% and 30% annually on their premiums.

“The value is not only in the rebate,” he says. “It is also about visibility. If you know exactly how and when your vehicles are being used, you can make better decisions immediately, rather than reacting once costs have already escalated.”

Importantly, cover still applies when vehicles are not in use. If machinery is parked in a shed and the building is damaged by fire, for example, the insured assets remain protected.

As farmers navigate another season of uncertainty, Stapelberg believes the focus should not only be on surviving immediate pressures, but on building resilience through smarter operational decisions. “Agriculture has always required adaptability,” he says. “The challenge now is making every litre, every trip, and every decision count in a way that protects both the farm and the people who depend on it.”