Key factors that could contribute to further increases in food inflation over the next few months include the exchange rate and the extent of continued load shedding in South Africa. The bureau for food and agricultural policy (BFAP) says in its February report on food inflation that load shedding has already added significant costs to the production value chain.
“If load shedding is maintained at lower levels, the effects may be less, but the general consensus is that load shedding will be maintained at relatively high levels for the foreseeable future – which will be a key factor in keeping South African food prices higher for longer.”
Headline inflation fell from 7.8% in July last year to 6.9% in January this year, while it increased again by 0.1% to 7% in February. Food inflation has been rising continuously for almost a year and, according to the most recent figure, has increased by a further 0.2% to 13.6%.
The BFAP says in the report that the highest annual inflation was that of bread and cereals, followed by oil and fats, vegetables and then meat. Fruit, with an annual inflation rate of 3%, showed the lowest increase.
The highest monthly inflation rates were for non-alcoholic beverages, again followed by bread and cereals, and then fish, dairy and eggs, vegetables and finally fruit.
Several of the products that are staples in many households – and which have all become more expensive by between 10% and 30% in the past year – include cornmeal, bread, pasta, ground meat, frozen chicken pieces, T-bone, ham, bacon, flour , margarine, peanut butter, canned tuna, onions, peppers, apples, pineapples, spinach, cabbage, pumpkin, carrots and potatoes.
The price of lettuce, broccoli, beetroot, mushrooms and sweet potatoes has risen by 10-20% in the past year.
Items that have become between 6% and 10% more expensive in the past year include rib chops, frozen fish fingers, cheddar cheese, sour milk, yogurt, sugar, fruit juice and sugary drinks.
Vermeulen says the dominant contributors to food inflation are meat and fish, bread and cereals, dairy and eggs, as well as vegetables.
“Many of the factors that have driven food inflation over the past year are not unique to South Africa. This includes higher agricultural commodity prices worldwide, as well as high power costs which in turn have an effect on the price of inputs such as fuel and fertiliser.
“Although several of these international factors are now diminishing … the weakening of South Africa’s exchange rate has reversed much of the international decline, while continued high levels of load shedding have added significant costs across the agricultural and food value chain.”
Grain and oilseeds
Globally, the price of grain and oilseeds is falling, but more slowly than initially expected, says Vermeulen. Key factors for this include the ongoing conflict between Russia and Ukraine, both major exporters of grain and oilseeds, and climate conditions in North and South America.
In the US, inventories have fallen to the lowest level in five years and amid uncertainty about the ongoing war, small changes in production expectations can have a significant effect on prices, says Vermeulen.
Sunflower production is expected to barely meet local demand, with possible exports towards the end of the season.
“South Africa’s main grain and oilseed prices should fall over the coming months due to the continued fall in international prices, but only in the absence of a further weakening in the exchange rate. Should the rand weaken further, this could offset global price declines and prevent the transmission of lower prices to South African markets.”
The price of meat also drove up food inflation in February.
“With consumer spending under increasing pressure and exports slower than usual, the price of beef carcasses has started to fall and this may spill over into retail prices for meat products in the coming months,” says the BFAP’s report.
Poultry prices increased further in February – mainly due to the weaker exchange rate which reduced the fall in international prices, as well as the effect of load shedding on the country’s poultry processing capacity.
Vegetables and fruits
The price of onions, potatoes and tomatoes may also make consumers’ eyes stretch. The prices of these products have risen sharply amid fluctuating weather conditions.
The upward trend for tomatoes is expected to continue until the Easter weekend, while certain fruits may also become more expensive over the next few months.
The price of bananas is one of them. Flooding in the south of Mozambique is putting pressure on stocks – and around 75% of all bananas sold on Gauteng’s municipal markets come from Mozambique and eSwatini (Swaziland).
The effects of cyclone Freddy, damaged roads which have an effect on logistics and low stock levels on the Johannesburg markets, have now pushed the price of bananas up to R50 per 18 kg/box.
Greater availability is expected to lower the price of oranges in turn. This follows significant expansion in the production of oranges in South Africa in recent years.
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