Good news for South African farmers

The fuel price cut South Africa will experience in April and onward is set to boost the country’s agriculture profitability outlook following a tough year for the sector.

FNB Commercial Senior Agricultural Economist Paul Makube explained that South Africa’s monthly fuel price for April 2025 has been adjusted downwards.

This was driven by a combination of rand appreciation and lower international Brent crude oil prices. 

The rand strengthened by 1.1% to R18.30 against the US dollar, while international crude oil prices fell sharply by 5% month-on-month to $71.04 per barrel following the Trump tariff onslaught that unsettled markets and an improved global supply outlook.

“The latest announcement from the Department of Mineral and Petroleum Resources indicates that petrol prices will decrease by 58 cents and 92 cents per litre for the 93 and 95 grades, respectively, in April 2025,” Makube said. 

“This brings prices down from February levels of R21.51 per litre and R21.62 per litre.” 

Similarly, he said diesel prices for 0.05% and 0.005% sulphur content will decrease by 84 cents and 86 cents per litre, respectively, to R19.32 per litre and R19.34 per litre.

He explained that the bearish outlook for international crude oil prices – driven by US tariffs, sluggish economic growth in China and India, and increased output by OPEC+ – suggests the possibility of further fuel price reductions in the coming months. 

“This is positive news for the agriculture sector, as lower fuel prices reduce transportation costs for both production inputs and the distribution of produce to local and international markets, ultimately improving farmer profit margins,” he said.

This comes as South Africa’s agricultural sector is gradually recovering from the devastating 2024 El Niño-induced drought, which led to a 22% year-on-year decline in summer crop harvests. 

However, Makube said the production outlook remains strong, supported by excellent seasonal rains since the beginning of 2025. 

Consumers are also set to benefit as lower fuel costs will help keep food inflation on a downward trend.

This follows four consecutive months below 2% year-on-year, including a record low of 1.9% year-on-year in February – the lowest since January 2011.

Big challenges

Santam’s business head of agri underwriting, Hanjo Fourie, recently said climate change, rising input costs, and deteriorating infrastructure pose significant risks to South African farmers.

Fourie explained that the agriculture sector is integral to the South African economy.

It contributes around R400 billion to GDP annually, supports approximately 870,000 jobs, and brings in $13 billion (R235.5 billion) in export revenue.

“Additionally, it plays a critical role in supporting South Africa’s food security – a growing risk globally,” Fourie said.

However, he said that, unfortunately, the sector is more prone to the systemic risk of climate change, and specifically water-related losses, than any other sector.

“The impact of climate change on farming is already evident, with unpredictable weather patterns such as drought, flooding, and hail causing substantial damage to both crops and infrastructure,” he said.

He added that the majority of these weather-related catastrophe claims on crops were for hail.

“Although climate change risk is top-of-mind among global insurers and reinsurers, farmers have long battled the severe effects of weather patterns such as El Niño and La Niña.”

El Niño is a weather phenomenon that results in less rainfall and higher temperatures across much of Sub-Saharan Africa. La Niña contributes to periods of above-average annual rainfall in the region.

“In addition to shifting climate factors, the current landscape means that farmers are already contending with higher input costs like diesel, fertilizer, and pesticides, among others,” Fourie said.

“This increases the cost of production for farmers, which makes it even more important to mitigate production risks.”

“To ensure there is a return on capital invested, and thereby the sustainability of the operation secured, the impact of production risks must be managed sufficiently.”