Agricultural experts are optimistic that South Africa’s consumer food inflation will continue to slow throughout the year into next year as the latest data from Statistics SA, released yesterday, showed the country’s consumer food inflation slightly slowed to 8% in September.
Consumer food inflation was at 8.2% in August.
Product prices underpinning September’s food inflation cooling were mainly bread and cereals; oils and fats; sugar, sweets and desserts; and vegetables.
The Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo said yesterday the organisation was optimistic about prices easing despite renewed risks in global agriculture, such as India’s decision to ban specific categories of rice exports and the Black Sea Grain Initiative that facilitated grains and oilseeds exports from Ukraine terminated as well as domestically with the avian flu.
“The spreading of avian influenza has mostly affected Gauteng, Mpumalanga, Free State, Limpopo and North West. Over a hundred primarily commercial facilities have reported avian influenza cases. There are reported losses in parental stock for breeders of layers and in broilers.
“In response to the challenge, the Department of Agriculture, Land Reform and Rural Development, along with poultry producers and retailers, are exploring a range of instruments to respond to the current crisis,” Sihlobo said.
Agbiz said there was anecdotal evidence of various retailers that had adjusted egg prices significantly to manage the demand.
“Such price adjustments in a short period have raised concerns about the possible impact of the current avian influenza on food inflation. What will matter a lot is the duration of these higher prices, which we doubt will persist for an extended period if the interventions of imports and control of the spread of the disease we listed above succeed.
“The current increases could be a temporary blip, which will likely show on one-monthly inflation figures, and the trend would then continue to the expected path we were on before, which is deceleration or sideways,” he said.
Beyond the poultry developments, Agbiz said the products that could underpin the slowing food inflation trend would likely remain similar to those in the past few months, specifically grain-related products, fats and oils, and fruit and vegetables.
However, South Africa might see temporary price increases in potatoes due to quality issues and lower volumes in some regions. Price shocks were already visible in some fresh produce markets nationwide. Given the anticipated demand and potential slight price increase, the meat price trend could slightly change ahead of the festive season, he said.
Regarding the “bread and cereals” product prices, Sihlobo said admittedly, the Black Sea grain deal challenges and India’s rice exports ban were an upside price risk.
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.
“Still, we have not seen material price changes in the grain prices so far, although there were price reactions after the announcements of both the Black Sea deal and the India rice exports ban. Hence, we expect the prices of grain-related products in the inflation basket to maintain a softening path.”
Agbiz said the prices of these products were influenced by global developments as the country was an open economy interlinked to the world markets.
The National Agricultural Marketing Council chief economist Thabile Nkunjana said the food inflation print indicated that food inflation had remained modest in recent months, from 14% highs in March and April of this year.
“In part, this reflects the current global market situation as a result of the ongoing rice uncertainty caused by India’s ban on certain rice products. Despite the ongoing conflict and the suspension of the grain deal, some grains are being exported from Ukraine via a newly opened channel. However, the volumes are significantly lower.”
He said while overall food inflation remained nearly unchanged in September, vegetable prices were higher than in previous months, with a 0.6% month-on-month decrease but a 15.3% year-on-year increase. Onions and potatoes were two vegetables that have pushed up overall vegetable prices.
“Given the favourable prognosis for overall food production, particularly grains, food inflation in South Africa may moderate modestly towards the end of 2023. Furthermore, global markets appear to be backing this position, as evidenced by the recent drop in food prices published by the Food and Agriculture Organization (FAO).”
BUSINESS REPORT