Cheaper fuel, but not cheaper food

2009-01-06 00:00

Johannesburg — Manufacturers and businesses may hold back for a while before they pass last night’s fuel price cuts on to consumers.

High debt levels, expensive food and rising transport costs have made consumers’ pockets lighter. Businesses realise this and have absorbed some of the rising costs of diesel and other commodities.

Cadiz Securities economist Kim Silberman said that it is unlikely that concerns will immediately lower prices in keeping with the drop in the fuel price.

According to University of Free State agri-economist Professor Johan Willemse, the lower fuel prices could offer the agricultural industry considerable relief.

The cost of transporting perishable products like milk, bread, meat, fruit and vegetables to market has come down. Willemse said this reduction should filter through to retailers’ shelves, but this does not necessarily always follow.

In the agricultural industry, input costs should drop after fuel price cuts, but the recent reductions have generally been too late. Those activities for which the most fuel is consumed are at an end.

Willemse says the reductions will, in the long run, bring relief to rural areas. Recently, some producers reduced production as transport placed so much pressure on profit margins.

Retailer Pick n Pay’s financial director Dennis Cope said that the group’s prices are determined mainly by suppliers. He added that Pick n Pay will reduce prices as soon as supplier prices come down.

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