Consumers face grim year as prices rocket

Brian Hayward WEEKEND POST REPORTER haywardb@avusa.co.za

THERE will be no respite from spiraling food prices for Eastern and Southern Cape residents for at least another 12 months, say experts, as the region‘s farmers reel in the wake of record fuel prices and likely Eskom tariff hikes of up to 60 per cent.

Already crippled by the rising costs and a further 0,5 per cent interest rate hike this week – taking the bank‘s prime lending rate to 15% – farmers say they have never known tougher times. Over the past year the price of fertiliser has jumped a massive 300%, the diesel price has risen more than 60% and maize, a major input for farmers, has risen 33% and is expected to rise further.

This week the Congress of South African Trade Unions said it would embark on protest action over the rocketing food prices.

Farmers say the continued pressure will see a mass exodus from the industry of farmers unable to make ends meet.

“Farmers are being pushed out of the industry because of spiraling costs,” said senior manager at the National Agricultural Marketing Council, Andre Jooste. “The input costs issue is a really big concern, because the inputs are becoming more inaccessible (because of their high price).”

The price for fuel is also expected to rise further in May and according to Fuel Retailers‘ Association head Peter Morgan, the price for petrol could get close to R10 a litre before the year is out. Farmers have been hit by a 67% rise per litre in the price of petrol and a massive R1,30 per litre rise in the price for diesel this month.

The cost of fresh produce is also expected to continue rising after a price jump over the past year of 92% for cabbage, 69% for onions, 59% for pumpkin and 47% for potatoes. Dairy prices have risen by over 33% over the past year while experts predict the price of lamb and mutton, now typically costing between R40 and R70 per kilogram, will spiral to “well over” R100 per kilogram by the end of the year.

According to Professor Johan Willemse, chairman of agricultural economics at the University of the Free State, farmers were already “producing at capacity” and were unable to up production given the tough farming conditions.

Because of the higher fuel costs, not only will it cost farmers more to plant crops – the cost for planting maize has jumped 60% and the cost of harvesting 70% over the past year – but the price of getting the produce to markets is set to spiral along with the fuel price.

“The lag between producer costs being passed onto consumers is typically four months,” said BJM Securities economist Elna Moolman. “I think the rest of the year is going to be pretty grim and things will only start improving when the interest rates start coming down, which is likely to be early 2009. So at least the next 12 months are going to be very tough.”

With the dairy industry just recovering from a national milk shortage, farmers have warned of another shortage coupled with inevitable further rises in milk prices. Already a litre of fresh, full cream milk has increased by 38% in price over the past year and typically costs about R6 a litre. The skyrocketing price of input costs will also see many farmers exit the industry.

“Two months ago everything was great and dairy farmers were optimistic, but now the wheels have come off completely,” said Tsitsikamma dairy farmer Nigel Lok, who has been farming for the past 25 years. He said Eskom blackouts meant farmers had to use expensive diesel generators while the 300% jump in the cost of fertiliser meant many were reducing their fertilising. Higher costs of living also meant labourers were asking for higher salaries, he said. “Milk production will plummet if such conditions continue as farmers reduce fertilising (reducing milk production) and slaughter off their cattle to make ends meet. Smaller producers are the first guys to go.”

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