South Africa’s consumer food inflation slowed to 8.2% last month from 10% in the previous month, Statistics South Africa data showed yesterday.
Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo said in response to the data that the product prices underpinning this deceleration were similar to the previous month, mainly bread and cereals, meat, fish, oils and fats; milk, eggs and cheese and vegetables.
“In essence, we stated that while there are renewed risks in global agriculture, such as India’s decision to ban specific categories of rice exports and the Black Sea Grain Deal Initiative that facilitated grains and oilseeds exports from Ukraine terminated, and domestically the increases in fuel prices, we are still optimistic that South Africa’s consumer food inflation will continue to slow throughout the year into 2024,” Sihlobo said.
Products that could underpin the slowing food inflation trend would likely remain similar to those in the past few months.
Notably, red meat prices, which have softened at the farm level, should continue on this trend at the retail level in the coming months. Fruit and vegetable prices should remain relatively affordable because of improved domestic supplies.
“We may, however, see temporary blips in the prices of products such as potatoes due to seasonality,” Agbiz said.
With regards to the “bread and cereals” product prices, the Black Sea Grain Deal challenges, and India’s rice exports ban there were upside price risks.
“With South Africa importing a million tons of rice and similarly exposed to wheat imports, the disruption in trade of these commodities and the length of it could have implications on global price and, ultimately, South Africa’s ”bread and cereals“ component of the food inflation basket. We are already seeing a surge in global rice prices,” it said.
However, Sihlobo said that the organisation had not seen a material change in prices domestically and there would be a lag between three to five months before these were apparent at the retail level.
Agbiz had feared that the “oils and fats” products prices would start to increase and follow the global price trend, which showed an uptick in July. But the recent data from the Food and Agriculture Organisation (FAO) showed a retraction. For example, last month, the FAO’s vegetable oil price index was at 126 points, down 3% from July 2023 and 23% year on year (y/y). The decline in the global prices of palm, sunflower, soybean and canola oils underpinned this.
Paul Makube, a senior agricultural economist at FNB Commercial, said although the headline inflation ticked up marginally from 4.7% in July to 4.8% last month, the food inflation figures yesterday provided a much-needed breather for the consumer after a hectic year after food inflation topped 14.4% y/y in May.
FNB expected this trend to continue as production rebounded in vegetable production and the increased availability of fruits.
“The summer crop harvest is done and dusted with a huge crop of 17.3 million tons, which is up 5% y/y. Maize, which accounts for 95% of this total, came in at 16.4 million tons, up 6% y/y and the carryover stock for the 2023/24 marketing season is estimated at 2.84 million tons. The winter crop harvest outlook is also impressive with the estimate for the major crop, wheat, pegged at 2.14 million tons, up 1.5% y/y,” he said.
However, the renewed upside in fuel costs due to the elevated international crude oil prices and a relatively weaker rand might complicate the outlook.
Makube added that the decline presented an opportunity to provide more competitive pricing options for consumers and increase market share in the food value chain.