Fuel hike adds pressure to farm margins

Source: Wolfgang Weiser via Pexels

While smaller than April’s sharp adjustment, the latest hike adds to the cumulative increases this year, raising concerns about further pressure on already-constrained farm margins.

Fuel prices climb

Similarly, the two grades of petrol rose by R3.27/l to R26.63/l (95 ULP) and R25.76/l (93 UL & LRP) with a cumulative year to date increase of R11.88/l and R11.84 for the two grades respectively.

The good news is that the Ministers of Finance and that of Mineral and Petroleum Resources jointly announced an extension of the R3/l temporary relief in the general fuel levy for fuel until Tuesday 2 June 2026 with an additional 93 cents which effectively brought the diesel levy to zero (R0.00/l) from Wednesday 6 May 2026 to Tuesday 2 June 2026.

Margins under pressure

While this is a positive development, the reality is that farmers are “price takers” and their ability to easily recoup the additional costs is almost non-existent, implying further erosion of profit margins amid low commodity price environment (grains and oilseeds).

For example, average maize prices for April 2026 were still 37% and 30% below last year at R3,212/t and R3,334/t for the white and yellow subcategories, respectively.

Similarly, the futures market shows white and yellow for July 2026 delivery still trailing last year’s by 34% and 29%, respectively. Further pressures include fuel availability constraints and the huge uncertainty regarding the settlement of the Middle East war.

Seasonal demand rises

We have entered the period of heightened fuel demand in the agriculture activity calendar with the onset of winter crop plantings, the summer crop harvest, and citrus export season and the elevated costs threaten the profitability of these industries.

Fuel is critical in planting and harvesting in the grains and oilseed industry, accounting for approximately 13% of input costs. In farm logistics, fuel is central to moving agriculture produce and various inputs to and from markets and suppliers respectively.

On the consumer front, higher fuel means a further erosion of disposable incomes due to added costs such as transport fees, increases in prices of various food commodities due to distribution and associated costs of landing the products for consumption.

Nonetheless, we are hopeful of a settlement in the medium term which could see a full reversal in the international crude oil price trajectory. This means farmers may not face catastrophic input price increases at the onset of the 2026/27 crop season in six months’ time.