South Africa has experienced fuel price increases over the past few months, with the current price hitting an all-time record high. However, this is not the end. According to the latest information from the Central Energy Fund, South Africa is set for another fuel increase on 1 August 2018. A number of factors contribute to the wholesale price of diesel, which include external influences such as the international crude oil price, exchange rate (R/$), and international supply and demand balances for petroleum products, as well as internal elements such as domestic transport costs, taxes and levies.

According to the latest information from the Central Energy Fund, the petrol price can increase in August by 2.9 cents per litre, diesel 1.2 cents and illuminating paraffin 7.5 cents a litre. At the beginning of July, diesel increased by 26 cents and 24 cents a litre for the 0.05% and 0.005% sulphur respectively. Contributing factors for this upcoming fuel increase is mainly the weak rand/dollar exchange and international oil prices, to a smaller extent.  However, over the two past weeks the rand has fought its way up and is looking stronger. Should this trend persist and the crude oil price remain at bay, the fuel price increase might not be as high as initially anticipated or prices might even remain unchanged.

Basic Fuel price (BFP) of petrol, diesel and illuminating paraffin is calculated daily. This daily calculated BFP is either higher or lower than the BFP reflected in the fuel price structure at that time. If daily BFP is higher than the BFP in the fuel prices, a unit under recovery is realised on that day. When the BFP is lower than the BFP in the price structures, an over recovery is realised on that day. An under recovery indicate that fuel consumers are paying too little for product on that day, whilst in an over recovery situation, consumers are paying too much for product on said day. These calculations are done daily - to accumulate a monthly average – in the fuel price review period, of which average is then calculated for the fuel price review period is calculated. The average amount will determine the over/under recovery for the following month. During an under recovery, and if the cost of fuel remains the same, fuel distributors in South Africa will essentially operate at a loss; to avoid this, prices have to increase. The reverse applies to an over recovery. Price increase announcements are done the last Friday of every month and take effect the first Wednesday of each month.         

Effect of fuel price increases
The most common form of transportation for produce in South Africa is by road; about 80% of grain is transported by road. Harvesting of summer grains is still under way, harvesting of winter cereals will start in three months and summer grain farmers will start preparing their soils, therefore demand for fuel will soon be high, especially for those who buy in advance. Should the current trend of fuel increases continue, the effect of a fuel price increase essentially reduces profit margins for the producer, as input costs increase over the long run.  

Figure 1 below shows the increase in diesel wholesale prices over the past 6 months against the average exchange rate and Brent crude oil over the same period.

Figure1: Wholesale diesel price (inland and coastal) against exchange rate and crude oil prices. Source: Central Energy Fund, Grain SA.

INTERNATIONAL PRICES LIFT...

International versus local fertiliser price trends
A large amount of SA's fertiliser needs  must be imported, and trends in international prices and the exchange rate can thus be used to predict local price movements.

Internationally, prices have been used in certain ports while domestically, average prices of various fertiliser companies are used. The intent is to capture comparative year-on-year trends rather than on the physical price.

Table 1 indicate global price trends in dollar terms, while Table 2 shows the same prices in rand value. In international markets, prices of all raw materials have increased, but urea prices have risen sharply in dollar terms over a period of years. The rand has weakened by 3.3% over a year, which should further disadvantage local fertiliser prices. Table 2 indicate the rise of international fertiliser prices in rand value, of between 10.9% and 33.6% year on year.

Table 3 indicate changes to local fertiliser trends over a year period. The table shows that domestic price trends correlate well with international price trends, except that urea and phosphate prices may still increase locally.

INTERNATIONAL AGRICULTURE CHEMICAL PRICE TRENDS

Essentially 100% of the active ingredients needed to manufacture agricultural chemicals are imported. International trends and the exchange rate will therefore play a decisive role in domestic pricing.

Tables 1 to 4 indicate trends in international agricultural chemicals (active ingredients) prices in a Chinese port. Tables 2 and 4 indicate international prices in rand value. The rand has weakened from June 2017 to June 2018 by 3.3%/

As far as herbicides are concerned, all active ingredients show sharp increases in rand value every year.

Table 1: Herbicide prices: International in dollar value

Table 2: Herbicide prices: International in rand value

When reviewing insecticide prices, the most actives indicate sharp rising trend in dollar as well as in rand values. According to Chinese market reports, the state implements very strict pollution legislation, with many plants closing as a result. This limits the supply of active ingredients and has pushed prices sharply.

It is important to take note that many of the multi-national companies' products are not imported from China, and therefore would not show similar increases. According to multi-national companies, prices should increase between 5% and 12%.

Table 3: Insecticide prices: International in dollar value

Table 4: Insecticide prices: International in rand value

Graan SA's NAMPO personnel undertook to give the Nala Ratabilê Children's home a overhaul, as part of celebrating Mandela's 100th birthday. Following a visit to establish the needs, the team vowed to do as much as possible, with paint, scrubbing and filling the need for basic linen, cutlery and crockery high on the list of priorities. Approaching several organisations and donateurs, everyone pitched in to make this change a reality, and we wish to thank the following partners for their kind donations:

Paint (Monsanto); Ceiling paint, paint accessories, tape and thinners (Senwes);  marking, repair and replacement of lights and wall plugs that were out of order (Bothaville Electrical); door locks and handles (Balkin); silicone and brackets (Piet Lindeque); and sugar soap (Spar). Grain SA donated inners, pillows, bedding, cleaning material, towels, curtains and furthermore obtained more linen and curtain accessories from private donations.

Casual workers from NAMPO volunteered to help with this project for an entire week and we wish to thank Manana Bosiu, Emily Makatelle, Virginia Makatelle, Alina Makatelle, Anna Mokone, Ana Mokone, Ali Speelman, Charles Motholi and Enest Tjabane for their precious time. Furthermore, NAMPO personnel, Xolile Speelman, Isaac Mpitso, Thomas Mohapi drilled and fixed all items and painted jungle gyms and fences. Under the leadership of the NAMPO team, consisting of Bennie Saayman, Annemarie de Beer, Marina Kleynhans, Rialeen Lombaard and Wim Venter, this well-oiled machine made magic happen in a short space of time. 

Providing a home for 12 boys ranging from 10-19 years and 12 girls ranging from 3-21 years, the Nala Ratabilê Children's home are now somewhat better equipped to offer a safe haven for these youngsters. Furthermore, it made every individual involved in the project, realise that everyone can make a difference. It does not have to be monetary, but time - which we receive from our Father equally everyday, can be used to share with others, and make a difference.

The No-Till Conference and Cover Crop Workshop taking place from 4-6 September 2018 at the ATKV Drakensville Holiday Resort will focus on 
Managing Adversity with Diversity with Emerging Cover Crop Strategies by Making Cover Crops Pay

The purpose of the conference will highlight the imperative of examining soil using analysis and checking-serious compaction before embarking on No-Till. It will highlight that No-Till is a system, based on creating protective mulch – cover crops – and a crop rotation and will further guide delegates to strive towards a more biological diverse and integrated cropping and livestock farming enterprise. Delegates are urged to register early and book accommodation, with details available on the programme. 

Download the Conference information here

Download the Conference programme here