ANOTHER drop in fuel prices is a positive development for farmers as it comes at the right time, coinciding with the onset of heightened activity in the agriculture calendar, according to Paul Makube (pictured), senior agricultural economist, FNB Commercial. The sector is heading into a period of increased demand for fuel due to the summer crop harvesting and the planting of winter crops.

The combination of the US tariff onslaught and elevated trade tensions and their consequent drag on global economic growth continued to weigh heavily on international crude oil prices. The improved global supply of oil outlook, with elevated production from non-OPEC and OPEC+ members, added further downward pressure, says Makube.

“ According to the Department of Mineral and Petroleum Resources, international Brent crude oil prices fell by 6.5% (-US$4.65/bbl.) month-on-month (m/m) during the fuel price review period which more than offset the 3% (+R0.54/U$S) m/m rand weakness.

“Consequently, the price of the two grades of petrol decreased by 22 cents/ litre to R21.29/ litre and R21.40/ litre for the 93 (ULP) and 95 (ULP & LRP) respectively. The two grades of diesel saw decreases of 42 and 41 cents/ litre to R18.90/ litre and R18.93/ litre for the 0.05% and the 0.005% sulphur content, respectively.

“This will boost farmer profitability as fuel accounts for almost 13% of input costs in grain production,” he says.

Makube explains that farmers will soon ramp up their harvesting of 4.44 million hectares under summer crops, as well as planting of 827,970 hectares for winter crops. Further, the export season for citrus has begun and will benefit from the reduced cost of distribution of produce to ports. Finally, consumers will benefit immensely as food inflation and headline inflation are contained on the downside, thus affording the SARB room to cut or maintain interest rates at lower levels.