Big boost for South African farmers

The most recent fuel price adjustment is a positive development for local farmers, as it comes at the onset of the heightened activity in the agriculture calendar.

FNB Commercial’s senior agricultural economist, Paul Makube, explained that the fuel price cut, which came into force on Wednesday, 7 May 2025, comes at the right time for the local agriculture industry.

“We are now heading into the increased demand for fuel period in agriculture due to the summer crop harvesting and the planting of winter crops,” he said.

The cut in fuel prices was due to several factors, with the global oil price experiencing significant pressure.

Makube explained that the combination of the United States’ tariff onslaught and elevated trade tensions, and their consequent drag on global economic growth, continued to weigh heavily on international crude oil prices. 

The improved global oil supply outlook, combined with elevated production from non-OPEC and OPEC+ members, added further downward pressure.

The Department of Mineral and Petroleum Resources said international Brent crude oil prices fell by 6.5% month-on-month during the fuel price review period, which more than offset the 3% month-on-month rand weakness.

Therefore, the price of the two grades of petrol decreased by 22 cents/ litre to R21.29/ litre and R21.40/ litre for the 93 and 95, respectively. 

The two grades of diesel saw decreases of 42 and 41 cents/ litre to R18.90/ litre and R18.93/ litre for the 0.05% and the 0.005% sulphur content, respectively.

Makube said this will boost farmer profitability as fuel accounts for almost 13% of input costs in grain production.

This comes as farmers will soon ramp up their harvesting of 4.44 million hectares under summer crops and planting of 827,970 hectares for winter crops.

In addition, he said the export season for citrus has begun and will benefit from the reduced cost of distribution of produce to ports. 

“Finally, consumers will benefit immensely as food inflation and headline inflation are contained on the downside, thus affording the SARB room to cut or maintain interest rates at lower levels,” he said.

Local farmers under pressure

These fuel price cuts are a welcome development for the local agriculture industry, which is set to face difficult times in the coming months under United States President Donald Trump’s tariffs.

Earlier this year, Trump imposed a blanket 10% tariff on all imports, with steeper rates for the “worst offenders”, including South Africa.

The steeper rates have been paused for now, but this has left many industries, including agriculture, deeply uncertain about their future trading opportunities with the United States

The United States accounted for 4% of the total R267.1 billion in agricultural exports in 2024.

This may seem marginal, but it is significant for specific industries, particularly citrus, grapes, wine, and fruit juices.

The Agricultural Business Chamber of South Africa’s chief economist, Wandile Sihlobo, explained that these exports typically entered the US market duty-free under the African Growth & Opportunity Act (AGOA).

However, they now fall under the tariff level of between 10% and 31%. In addition, South Africa’s inclusion in the AGOA could be at risk as tensions between the US and South Africa rise.

Sihlobo said that while the local industry’s competitors, including Brazil, Chile, and Australia, will face only a 10% tariff, South Africa “will surely face a competitiveness problem in the US market”.

“Yes, the tariff is a tax on the US consumer, not South Africa. However, it affects South African products’ market penetration rate,” said Sihlobo.

For example, the Citrus Growers’ Association of Southern Africa (CGA) said the new tariff would place an additional $4.50 cost on each carton, making South Africa’s fruit less competitive in the US market.

Citrus Growers’ Association chairperson Gerrit van der Merwe previously warned that towns like Citrusdal in the Western Cape, which rely heavily on citrus exports to the United States, could bear the brunt of the new tariffs.

“The severity and immediate nature of the impending tariffs could mean that towns like it now face either increased unemployment or maybe even total economic collapse,” he said.