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Agriculture sector in the country faces rising costs

FNB Agribusiness’s senior agricultural economist, Paul Makube, said the South African Reserve Bank’s raising of its repo rate by 0.25 percent to 3.75 percent, effective from the end of last week, would lead to higher debt servicing costs. Picture: Simphiwe Mbokazi /African News Agency (ANA)

FNB Agribusiness’s senior agricultural economist, Paul Makube, said the South African Reserve Bank’s raising of its repo rate by 0.25 percent to 3.75 percent, effective from the end of last week, would lead to higher debt servicing costs. Picture: Simphiwe Mbokazi /African News Agency (ANA)

Published Nov 23, 2021

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FNB Agribusiness’s senior agricultural economist, Paul Makube, said the South African Reserve Bank’s raising of its repo rate by 0.25 percent to 3.75 percent, effective from the end of last week, would lead to higher debt servicing costs.

These, amid mounting cost pressures emanating from a massive upswing in fuel, fertiliser, pesticide and herbicide prices, would trim profit margins in the sector despite a fantastic outlook for the season ahead, he said.

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“The record low interest environment over the past year provided a breather for farmers and allowed them to do the necessary replacement and replenishment of machinery and equipment.

“So far, tractor and combine harvester sales for the year to October 2021 were already 6 percent and 33 percent ahead of the 2020 levels, which showed strong optimism for the agriculture outlook,” Makube said.

Meanwhile, according to the Citrus Growers Association research economist, Portia Magwaza, in the 2021 Lemon Seasonal Review on Friday, this has been a very tough lemon season given the range of logistics and market challenges that growers and exporters have had to contend with.

She said while export volumes were up, their costs had increased significantly, the exchange rate had moved against exporters and lemon prices were well below 2020 values.

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