Record diesel prices will increase food production costs

Fuel prices have skyrocketed this week, with petrol hitting a four-year high and diesel breaking all previous records.

This is likely to impact the price of many staple foods, including bread, in the coming weeks and months.

The fuel price hikes will substantially increase production prices for farmers. The price of diesel, which accounts for between 12 and 18% of the average farmer's costs, has jumped from R17.93 per litre to R25.03 per litre (wholesale price).

Keep up with the latest headlines on WhatsApp | LinkedIn

April is a key month for the planting of grains, including wheat, so farmers will be spending far more on fuel to run agricultural machinery.

Fertiliser, which is made from oil and gas byproducts and accounts for more than a third of the average farmer's costs, has got more expensive due to problems importing it from the Middle East.

Prices are further driven up because diesel trucks are used to transport goods - from unprocessed grain through to packaged bread - all along the production cycle.

In a joint statement this week, representatives of GrainSA and the Fertiliser Association of Southern Africa described South Africa as "particularly vulnerable due to the country's reliance on imported fuel and fertiliser".

The global price of oil has shot above US$100 a barrel after US and Israeli attacks on Iran.

Maritime traffic through major global transit points, like the Strait of Hormuz, has been restricted since the war began last month. Attacks on major oil producers in the Middle East, which also accounts for much of the world's fertiliser production, have restricted oil supply, driving up costs.

South Africa hasn't seen petrol prices this high since July 2022, when Russia invaded Ukraine. In response, the government temporarily reduced fuel levies to ease the impact. It has done so again, on Tuesday, reducing the petrol levy from R4.10 a litre to R1.10 and the diesel levy from R3.93 a litre to 93 cents a litre. This levy is included in the price at the pump.

According to a joint statement from the Treasury and the Department of Mineral Resources, the measure is part of a broader strategy intended to "support households and key sectors of the economy".

Chart produced by The Outlier in partnership with GroundUp.