Grain costs shoot up

The latest cost budgets for the production of wheat due to be planted in the coming months indicate that the variable cost component increased on average by 63%," said Grain SA chairperson Neels Ferreira.

These included the cost of seed, fertiliser, chemicals for weed and pest control, fuel, repairs and spares, marketing costs and interest on production credit.

Measured on a year-on-year basis, all cost components showed increased price levels, but the highest increases were experienced on fertilisers, up 98%, purchased seed up 24%, diesel up 55% and interest on production credit up 63%.

Straining budgets

As far as summer grains were concerned, budgets for the coming production season, starting in October, indicate that production costs of various crops would increase by between 30% and 50%.

The most significant increases occurred in the price of fertilisers, up 58%, diesel up 33%, herbicides up 42% and interest on production credit up 30%.

In addition, there was some uncertainty about further increases that could occur between March and the planting season in October.

Lower profits

Ferreira said the effect of these input cost increases on the profitability of grain production.

It was buffered to some extent by the current higher grain prices, but any sustained decrease in grain prices could result in great risks for grain producers.

"The price of inputs very seldom decrease and it must be accepted that the present price levels will continue; whereas grain prices are much more volatile and there is no guarantee that it will remain high," he said.

- Sapa