AGRICULTURAL NEWS - The drought has caused a significant drop in planted areas, but much-awaited rains have brought some relief and farmers can finally commence with planting.
The latest Crop Estimates Committee's (CEC) planting intentions report showed a rebound in the expected area for most of the crops. Approximately 3.753 million hectares will come under crop production during the 2016/17 season.
Dawie Maree, head of information and marketing at FNB Business, Agriculture, says “as farmers begin with their seasonal activities, we look at the relative input costs that they face. While input costs remain elevated when compared to historical trends, there has been some decline which bodes well for the season going forward.”
Maree adds, “fertiliser and fuel are the major inputs in crop production, particularly grains, and accounts for approximately 35% and 11% of total variable costs.
The prices of these inputs are largely influenced by the international crude oil market from a transport (freight) perspective as well as the fact that some are derived from oil processing. The benefits of lower crude oil prices were however offset by the increased volatility in the rand exchange rate that we continue to experience.”
Other important inputs for summer grain producers include herbicides and pesticides, electricity and water tariffs and labour.
Maree says in all of these we’ve experienced increases above inflation over the last couple of years. However, it seems that increases might ease off, except maybe for water tariffs.
The strength or weakness of the rand
The strength or weakness of the rand has a huge impact on input prices in the agriculture sector. A weaker rand raises the prices of imported inputs such as fertiliser, pesticides, and herbicides. In addition, the prices of most grain commodities are parity based and the weaker rand has helped increase the price of maize which is a major ingredient in the manufacturing of livestock feeds. The stronger rand, however, has an opposite effect.
