South Africa faces a concerning surge in food inflation, as per the latest release from Statistics South Africa. The report for October 2023 rings alarm bells, showing a notable increase in the year-on-year inflation rate for food and non-alcoholic beverages at 8.7%, marking a 1.5% surge from the previous month.
These figures contribute significantly to the overall Consumer Price Index headline inflation, which has risen to 5.9% year-on-year and 0.9% month-on-month.
A comprehensive report – a collaborative effort between the Bureau for Food and Agricultural Policy (BFAP) and Dr Marlene Louw from Absa Agribusiness – highlights the complex web of factors contributing to the mounting food inflation in the country.
Inflation hits key food categories
According to the report, vegetables, sugar-rich foods, dairy and eggs, bread and cereals, fruit, and non-alcoholic beverages top the list with the highest inflation rates. In contrast, oils and fats and meat recorded lower year-on-year inflation rates compared to the preceding month.
The BFAP Thrifty Healthy Food Basket, designed for the nutritional needs of low-income households, surged to R3,643/month in October 2023. This reflects a 1.9% increase from the previous month and an 8.4% jump year-on-year, placing substantial pressure on household budgets with food expenses constituting 31.7% of total expenditures.
Global and local factors at play
Globally, the FAO Food Price Index reported a 10.9% year-on-year decline, attributed to reduced prices of dairy, oils, cereals, and meat. However, local dynamics, including a 5.1% depreciation in the Rand/US Dollar exchange rate and persistent infrastructure challenges like electricity load shedding, contributed to escalating costs along the value chain.
An in-depth analysis highlights various factors contributing to inflation across food categories.
- Cereals: Global dynamics, including a wheat surplus in the USA and reduced maize supplies in Argentina, impacted global prices. While South Africa initially benefited from a bumper crop in 2023, concerns about potential El Niño impacts on future crops persist.
- Vegetables: Load shedding’s impact on irrigation led to a significant reduction in potato volumes, resulting in a staggering 209% year-on-year increase in prices. Onions also experienced supply volatility, affecting prices.
- Meat: Global pig meat prices declined due to high supplies and low demand from East Asian countries. Locally, poultry and beef prices reflected global trends, while pork and sheep meat prices saw contrasting trends.
- Sugar: Despite a month-on-month decline in global prices, concerns over global supply remain due to production issues in India and Thailand.
- Vegetable oils: Global prices saw a slight dip due to palm oil price reductions but remained higher for other oils, influenced by various factors like biodiesel demand and crop production changes.
Given the intricate interplay of global and domestic factors, projections for future food prices remain uncertain. A weaker Rand, persistent load shedding, and external market dynamics continue to exert pressure on input costs, affecting production and pricing across the food value chain.
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