Industry organisation Agri SA has expressed concern about rising input costs in the agricultural sector, echoing concerns raised by the Agricultural Business Chamber (Agbiz) earlier this week.

Agri SA says the cost of direct materials, labour and other overheads are particularly worrying, while Agbiz mentioned how fuel costs are gnawing at agribusiness’ profitability.

“The costs of fertiliser, herbicides, packaging, diesel, electricity and labour, to name a few, are increasing rapidly, making it nearly impossible for many farmers to produce food sustainably,” laments Agri SA executive director Christo van der Rheede.

The organisation is appealing to government and all other stakeholders to engage and intervene, in efforts to reduce the costs of inputs and to promote local supply and use of input materials, instead of imports.

Unpacking an example, Van der Rheede explains that international fertiliser prices have risen rapidly over the past year. South Africa, despite having one of the world’s largest producers of phosphate and phosphoric acid Foskor, is still the third-most expensive country in terms of fertiliser costs for a grain and oilseed producer, according to the Bureau for Food and Agricultural Policy.

“In recent years, South Africa has become more dependent on imported fertiliser as a result of Foskor’s inability to sell affordable phosphate to the South African fertiliser market.

"Currently, South Africa imports about 80% of phosphate for fertiliser manufacturers. This has an adverse effect on fertiliser prices, which leads to significant increases in the variable production cost of farmers,” Van der Rheede points out.

He adds that Foskor has some of the best quality phosphate resources in the world and has the capability and capacity to provide phosphate for Southern Africa.

“However, management and supply challenges are driving the phosphate price increase and delays. This is compounded by the frequent closures of the manufacturing plants in Richards Bay, which causes disruptions in the supply chain.”

Van der Rheede highlights that the combination of price increases to farmers, and disruptions in the supply chain, is putting food security at risk and has a severe impact on the profitability and sustainability of farmers.

Agri SA is appealing to government – particularly the Industrial Development Corporation and the Department of Trade, Industry and Competition – to engage with the agricultural industry to optimise the output of Foskor and to ensure the agriculture industry benefits from a regular supply and affordable pricing.

Turning to fuel costs, Agri SA says the yearly fuel inflation has been consistently higher than overall headline inflation since April this year.

According to Statistics South Africa, fuel inflation is steadily rising, up from 2.8% in August to 5% in September.

This change in fuel pricing is concerning as planting for the summer crop season looms, Agri SA and Agbiz both state.

Fuel generally accounts for between 11% and 13% of grain and oilseed production costs.

Preliminary estimates from the Central Energy Fund suggest that petrol and diesel prices could increase by R0.98/l and R1.41/l, respectively, on November 3. 

This adjustment means the retail price of petrol could increase to R19.31/l from the current level of R18.33/l.

Simultaneously, the wholesale diesel price could rise to R17.12/l from R15.71/l, Agbiz reports.

According to the Automobile Association, the current exchange rate and commodity data point to a fuel price hike at the end of October, with petrol up R0.99/l and diesel up by a staggering R1.42/l.

To this end, Agri SA is calling on the Department of Mineral Resources and Energy to deregulate the fuel price immediately.

“We can no longer be held hostage by policies or policy makers that seek greater control by government over the economy and the critical commodities such as fuel, electricity, water and gas,” Van der Rheede states.

He adds that this call has been supported by the National Treasury in that it already proposed in 2019 the deregulation of the country’s fuel price as a measure to stimulate economic growth.

Van der Rheede concludes that it is critical to keep input costs under control and at affordable rates.