There is concern that drought in parts of the country could drive up prices of essential foods such as bread, cereal maize and meat.
There is concern that drought in parts of the country could drive up prices of essential foods such as bread, cereal maize and meat.
While headline inflation declined to 4.6% in July, the lowest since July 2021, and South Africans have experienced positive effects in the economy in recent months with the fuel price having dropped for four consecutive months, expectations remain high that an interest rate cut is on the cards when the Monetary Policy Committee (MPC) meets later this month.
Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa (Agbiz), said that South Africa’s consumer food price inflation slowed to 3.9% in July 2024, from 4.1% in the previous month.
“This is the lowest level since January 2020 and was underpinned by the continued moderation in price inflation across most products in the food baskets, except for bread, cereal and meat products. The slowing price inflation in products such as oils and fats, milk, eggs, cheese, fruit and vegetables is due to increased supplies; to an extent, the stronger rand to the dollar helps in the case of imported vegetable oils.”
Sihlobo said they continue to monitor the prices of bread and cereals and believe the prices may increase in the coming months.
“The challenge arises from the mid-summer drought that led to a 19% year-on-year decline in maize production to an expected 13.34 million tons. White maize production is forecast at 6.35 million tons (down 26% y/y), and yellow maize at 6.99 million tons (down 12% y/y).
“Given the scale of the decline in the white maize harvest and the expected strong demand from southern Africa, we expect white maize prices to remain reasonably elevated for some time and thus sustain the increases in bread and cereal products in the food basket.”
Sihlobo said there is a possibility that meat prices could increase in the coming months.
“Weak consumer demand also remains a challenge, particularly for red meat.
“In summary, we continue to believe that the possible upside price risks on bread, cereals and meat, because of their more significant weightings in the food basket, may change the direction of the headline food price inflation from moderate to a mild uptick in the coming months.”
Bennie van Zyl, farming association TLU’s general manager, said that drought in South Africa would impact food prices.
“The drought impacts different commodities of food and if it impacts, for example, something like maize we will see less of it being produced and higher prices as there is enough supply to meet demand.”
Van Zyl believes that seasonal changes will affect the price of foods.
“Food like maize can be harvested once a year and if there is less of the product it will have an impact on the food chain. Supply and demand will always have an impact especially on essential food items. We have to bear in mind that our infrastructure such as roads and rail is not functioning at its best, so exports are not at their best and this also affects food prices.
“We know that steps are being taken to address road and rail but it needs to be functioning at its optimum level for the agriculture sector to be running smoothly.”
Van Zyl added that when farmers are facing difficulties, this is passed on to the consumer.
“It’s different for farmers when drought or cost of farming goes up as it affects production and that in turn is passed on to the consumer. We do try our best to ensure the best products are given to the consumer.”
The Mercury
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