South African consumers are set to face higher grocery bills in the coming months, as revealed by the Bureau for Food and Agricultural Policy’s (BFAP) August 2024 report on rising food prices and inflation.
The report stated that year-on-year inflation on food and non-alcoholic beverages increased to 4.7% in August 2024, with food inflation higher than the consumer price index (CPI) headline inflation for the first time in six months.
“The local vegetable oil market saw varied trends across key commodities. Soybean prices dropped by 2.2%
from July to August, with a 7.8% drop compared to August 2023.
“This drop marks a significant slowdown from the more pronounced year-on-year (YoY) drop of 15.4% in May and 13.7% in June. Soybean prices went down slightly from R9 254 per ton in August 2023 to R8 533 per ton in August 2024, ” the report stated.
Impact of weather on crops
The report highlighted that given the sharply reduced local soybean crop in 2024, soybean prices have broken away from export parity levels, trading instead at a level derived from its processed products, namely soybean meal and soybean oil.
“In Aug 2024 YoY inflation on fresh produce increased in comparison to July 2024, upward price pressure for oranges year on year and month on month was caused by various factors, including a smaller harvest due to drought conditions in the northern production regions earlier in 2024.
“Along with frost in Limpopo and the floods in the Western Cape province having a delayed effect on harvest volumes,” the report stated.
The report indicated that tomato production was lower this season as a result of the frost in Limpopo in July. Volumes traded on the fresh produce markets in August are 30% lower than Aug 2023 as a result.
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“The inverse is seen for onions, with higher traded volumes on fresh produce markets in Aug 2024 compared to the previous year causing downward price pressure in local markets, which were pulled through to the retail market,” the report said.
Dairy and meat industries
Meanwhile, in August 2024 South African maize prices remain high as a result of the reduced summer crop, with any significant declines only expected when the new harvest comes in in 2025. For white maize in particular, strong demand also contributed both from South Africa and other Southern African countries.
“Dairy prices also rose, particularly for whole milk powder and butter, amid strong global demand. In the meat market, beef prices dropped slightly but remained higher compared to the previous year, driven by increased cattle slaughters and export activity.
“While food inflation is expected to remain fairly stable in the near term, meat prices could increase somewhat as a result of festive season demand towards the end of the year. At the same time, persistence in the current trend of the appreciation in the value of the exchange rate following interest rate cuts in the USA (50 basis points) and SA (25 basis points) in September, could result in reduced inflation on imported food products,” the report said.
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