The Reserve Bank Monetary Policy Committee has decided to hike the repo rate by 50 basis points to 4.75% as of the 20th of May 2022. This immediately raises the cost of debt and farmers therefore face increased debt servicing costs which will erode profit margins.
The sector has been facing huge input cost pressures due to the war-induced escalation in fertilizer, herbicides, pesticides, and fuel prices. Total agriculture debt stood at R191 billion in 2020 which has increased with an annual compound growth rate of 10.4% in the past five years.
Harvesting of summer grains and oilseed crops has begun and will garner pace in the near term and the rising fuel costs will increase the cost of operations.
Further, with fertilizer prices having increased sharply in 2022 farmers will be forced to increase their debt requirements in preparation for the new planting season and subsequently higher debt costs due to rising interest rates.
Nonetheless, the agriculture outlook is still positive for the year ahead.
