Consumer food inflation is expected to remain sticky at relatively higher levels for another month or so, then decelerate in the second half of this year, says Wandile Sihlobo, the chief economist at the Agricultural Business Chamber (Agbiz).
Agbiz was commenting in the wake of data released by Statistics South Africa on Wednesday, which showed that consumer food inflation moderated at 14.3% in April from 14.4% the previous month. The food products prices that underpinned this slight deceleration are meat, oils and fats and fruit. Meanwhile, other product prices increased mildly.
Sihlobo said: ‘’The impact of load shedding may continue to influence prices for the next few months. Still, the various interventions to ease the load shedding burden on farmers, such as load curtailment, expansion of the diesel rebate to the food value chain, and, most recently, the launch of the Agro-Energy Fund, all support the production conditions.’’
Red meat prices, which had started to soften, should continue to moderate in the coming months as the trend was seen at the farm level. Fruit prices would likely follow a similar trend as the harvest across South Africa gained momentum and improved domestic supplies, Sihlobo said.
The moderation in the ‘’oils and fats’’ products was in line with what was seen in the global environment, as South Africa still imported its palm oil usage. For example, in April, the Food and Agriculture Organisation's vegetable oil price index was at 130 points, down 45% year on year.
‘’Still, the weaker rand exchange remains an upside risk to prices that could reduce the gains for local consumers. The same applies to rice and wheat, as South Africa is a net importer of these products,’’ he said.
Moreover, the relatively lower farm-level maize prices would filter into the retail products, mainly in the second half of this year. There was a lag between three and five months between farm and retail prices of some products, Sihlobo said.
The 2022/23 maize harvest was estimated at 15.9 million, 3% higher than the 2021/22 season's harvest and the third-largest harvest on record. Soya beans harvest could reach a record 2.8 million tonnes. Other field crops and fruits also showed prospects for decent harvest this season.
While various interventions supported production, the effectiveness of these energy support measures differed across farming enterprises and food companies, and the costs to food producers, mainly those not fully benefiting from the above efforts, remained high because of all the necessary mitigation measures.
Sihlobo said South Africa's consumer food inflation outlook for the year's second half was reasonably better.
‘’The key drivers of the expected moderation will be meat, grain-related products, vegetable oils, and fruits, which comprise roughly two-thirds of the consumer inflation food basket.’’
Earlier this month, the FAO Food Price Index (FFPI) released averaged 127.2 points in April this year, up 0.8 points (0.6 percent) from March, standing 31.2 points (19.7 percent) below its value in the corresponding month last year. The slight rebound in the FFPI in April was led by a steep increase in the sugar price index, along with an upturn in the meat price index, while the cereals, dairy and vegetable oil price indices continued to drop.
At the time, Benay Sager, the chairperson of the National Debt Counsellors’ Association, said South African inflation was driven mostly by what was happening with regulated prices, particularly petrol, electricity, municipal rates and so on.
‘’We did see in last month’s records that food inflation was 14% compared to a year before, and I think consumers are definitely feeling this. What happens in the international market is what this FAO Food Price Index indicates, and how much of that gets reflected in South African prices is a bit complex.
“Not all of the movements may feed into our local market, but I think the main thing is that inflation, unfortunately, continues to be high in South Africa. It’s really hurting consumers’ pockets, but it’s driven mainly by other things that are regulated,” Sager said.
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