South African farmers grapple with rising diesel costs as harvest season approaches

By Sisipho Skweyiya

LICHTENBURG, South Africa, April 1 (Reuters) - Derek Mathews watches as an old fuel pump fills a tractor with diesel on his 1,700-hectare arable farm in South Africa's North West Province. He frets over a nagging concern: how to secure and afford more fuel supplies before harvesting starts.

"It's terribly expensive to buy fuel at the moment, but the question I need to answer right now is can I get fuel?" Mathews, 64, told Reuters.

Farmers in South Africa and many other countries are struggling with a double price blow - fuel and fertilizer costs have shot up as the U.S.-Israeli war against Iran stifles key energy transit routes like the Strait of Hormuz.

While South African government officials and fuel industry executives have assured that the country's stocks are sufficient for April, farmers say suppliers are grappling with higher demand, logistics constraints and hoarding of diesel.

Mathews, who purchased 20,000 litres of diesel in February at 18 rand a litre, said he had about 12,000 litres left by March 30, or six days' worth of fuel for his farm as he prepares to harvest his sunflower and maize crops.

According to a March survey by agricultural body AgriSA, slightly fewer than half of farmers surveyed had difficulty sourcing diesel. Others managed inadequate purchases of between 50 and 500 litres.

"It's the uncertainty that keeps you awake," AgriSA CEO Johann Kotze said, adding that disinformation about fuel supplies has induced panic buying.

RISING DIESEL PRICES TO HIT PROFIT MARGINS

Mathews, who also produces dry beans and peanuts, ordered more diesel in March, by which time the price was 24 rand a litre, but the supplier has yet to deliver it.

Diesel prices are not strictly regulated in South Africa. However, the government said on Tuesday that it will temporarily intervene to cushion sharp fuel hikes by lowering the general fuel levy by 3 rand for April.

In its latest fuel adjustment, the government said that diesel wholesale prices will rise by up to 7.51 rand a litre on April 1 to just under 26 rand, while petrol prices will rise by 3.06 rand a litre.

For now, South Africa has sufficient crop production to keep a lid on food prices.

"South Africa had a favourable agricultural season and has ample supplies that should contain excessive price increases," Wandile Sihlobo, chief economist at Agricultural Business Chamber of South Africa, said during a Citibank client call on March 25.

Mathews, however, fears that could change if the war in the Middle East leads to a prolonged rise in fuel prices.

"If fuel prices remain at these elevated levels, with already depleted profit margins it doesn't make any financial sense at all to grow maize," he said of a food staple in South Africa.

($1 = 17.0268 rand)