LYNNETTE JOHNS
F ood prices are rising rapidly, and economists are painting a bleak picture for consumers.
The price of meat, poultry and oil has shot up and will continue to do so after adverse weather has decimated crops across the world, economists warn.
The rising cost of electricity and fuel are also to blame for the spike in food prices, especially in processed food.
Consumers will have to tighten their belt as the festive season draws closer, with further increases anticipated.
And it is the poor who will be hardest hit as most of their income is spent on food.
Economist Dawie Roodt said the increases were already being felt.
The prices of several staple foods have rocketed in the past year.
According to Statistics SA’s basket of goods, the price of lamb has increased by R15.25 a kilogram. Last June consumers paid R73.20/kg, while this year they are shelling out R88.45/kg for lamb.
Margarine prices have risen by R7.30 a kg.
Last June it cost R15.22 for a 500g brick, while this June the price was R18.87.
Bread has increased by R1 a loaf over the past year.
The cost of maize, a dietary staple for humans and animals, has gone up after South Africa’s surplus harvest was marketed in the Middle East and Asia, and now farmers are battling to keep up with demand.
Wheat prices have also increased and the effects are being seen in the steadily rising price of bread and other wheat products.
Adverse weather across the globe has had a serious impact on the sunflower crop, which remains the most common source of vegetable oil.
The supply of oils and fats dropped, but demand increased, pushing up the price.
Fats and oils are a component in most foods, so the demand is expected to remain high.
At the end of last year La Niña, the weather phenomenon that brings wet, cold weather to the northern hemisphere, arrived months earlier than expected and destroyed the sunflower crop.
Nkanyiso Hlongwa, an economist at the Bureau for Economic Research, said food inflation was higher than standard inflation and would remain elevated until April.
Current inflation is 5.3 percent, and is expected to be at 6.6 percent by the end of year, with target inflation at 6 percent.
Food inflation is 7.5 percent at the moment, but will reach 10 percent in December and taper off to 8 percent by April.
Besides adverse weather, the increase in the cost of electricity was also putting pressure on food prices, said Hlongwa.
Luke Marowitz, a senior ratings analyst at credit solutions provider Coface, said a large price increase was recorded in the oils and fats sector, which had a year-on-year rise of 23.8 percent and a 9.8 percent rise in meat prices.
He agreed that food inflation would reach double-digit figures by the end of the year, with most of the increase being in the grains, fats and oils products.
Gina Schoeman, an economist at Absa Capital, said there was a six- month lag between a grain price increase on the market and the time of actual impact on the consumer’s pocket.
However, the lag is much shorter with wheat, because the grain is used and needed all the time.
By the time wheat products arrive on store shelves, 50 percent of the costs have gone into transport, manufacturing and packing.
Wages are a significant cost component and in many sectors wage increases this year have been above inflation.
Most of the country’s wheat is imported from Russia, but a drought there means a shortage of wheat for South Africa.
Wheat farmers say it is not economically viable for them to farm the grain, as they are competing with countries such as Argentina that have government subsidies.
Swartland wheat farmer Andries Theron said more farmers were turning to planting canola, from which oil is derived.
Schoeman said: “The cost of meat and poultry will increase rapidly towards the end of the year.
“Until now there has been an 8 percent year-on-year increase, but the price is going to increase to 11 percent year-on-year.”
John Durr, CEO of the Red Meat Producers’ Organisation, said: “There is an increase in the price of red meat due to the recent drought in the Karoo and an outbreak of Rift Valley Fever, which forced farmers to cull their animals.”
But the main driver of meat shortages remained the devastation caused by the predator red jackal.
Durr said maize made up 50 percent of the diet of livestock, including poultry, so when the maize price climbs, input costs soar.
“Most of the input costs on farms are livestock feed.”
Schoeman said the maize price had increased due to the shortage.
The country has always had a surplus of maize, which is traditionally exported to countries in sub-Saharan Africa.
However, last year Tanzania and Zambia also had a surplus and they sold their maize to South Africa’s traditional markets.
This led to the country seeking new markets in the Middle East and Asia.
The surplus has since gone and farmers in South Africa are battling to keep up with the domestic market and fulfilling their international orders.