Food inflation falls to 3.5 percent year-low in March, but El Niño drought poses threat

SA’ food inflation falls to lowest level since September 2020. Picture: David Ritchie/Independent Newspapers

SA’ food inflation falls to lowest level since September 2020. Picture: David Ritchie/Independent Newspapers

Published Apr 18, 2024


Food inflation in South Africa fell to a 3-and-a-half year low after decelerating to 4.9% in March this year from 6.0% in February, buoyed by softer prices for bread, cereals, and meat, but the impact of El Niño drought threatens to disrupt this momentum.

Statistics South Africa (Stats SA) yesterday said this was the lowest level food inflation had been since September 2020, and also down from its peak of 14.0% in March 2023.

Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo yesterday said this decline was underpinned by the deceleration across most food products, except for "fish", which lifted mildly from the previous month.

“While it has been quite dry across the country, vegetable and fruit production has not taken a significant strain because all commercial production in South Africa is under irrigation, and load-shedding has been mild,” he said.

Sihlobo also said that meat prices had risen at the end of last year due to supply constraints of poultry products on the back of avian influenza.

“But there is now anecdotal evidence that the restocking process is underway and there is improvement in the poultry products supplies. Therefore, the risks of further price increases have subsided somewhat,” Sihlobo said.

“The prices of wheat, rice, and vegetable oils have moderated due to increased global supplies, and South Africa is a significant importer of these products.”

According to Stats SA, annual inflation for sugar, sweets and desserts has remained elevated above the 15.0% level since June 2023 as it reached 17.8% last month.

National Agricultural Marketing Council’s senior economist, Thabile Nkunjana, said concerns over a possible spike in consumer inflation have grown since reports of drought and crop losses brought on by El Niño.

Nkunjana said the drought struck during a time when most economists, including himself, predicted that food inflation would decline.

“We usually receive fresh grain supplies during these times, which helps to control food inflation; nevertheless, the reports of the drought may have an impact,” he said.

However, Nkunjana said the most positive news was the slowing down of inflation in the food and non-alcoholic beverages category, from 6.0% in February to 5.1% in March.

“For the suffering consumers, this is good news, but the drought casts a dark shadow,” he said.

“In the upcoming months, prices for basic goods derived from grains, particularly white maize, may rise.”

A ton of white maize sold for an average price R5 163 last month, representing a 26.3% year-over-year increase from R4 257 in February.

According to Agbiz, there were notable crop failures in South Africa's western regions, primarily white maize-producing regions with similar challenges in some yellow maize, other grains and oilseed regions.

Sihlobo said the estimates from the Crop Estimates Committee placed South Africa's 2023/24 white maize harvest at 6.3 million tons at the end of March, down 25% year-on-year.

“This has led to a surge in white maize prices. At the start of this week, white maize spot price was up 36% year-on-year, trading at R5 450 per ton,” Sihlobo said.

“In addition, the higher demand for white maize in the broader Southern African region due to crop failure also adds to the price increases. Over the coming months, part of the maize price increase will reflect on the ‘bread and cereal products’ of the inflation basket.”