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Food prices: here’s why you’re paying more

No, you're not imagining yourself. Global food prices have indeed increased by 3.1% from 2019, the highest it has been in three years. Agbiz chief economist Wandile Sihlobo says relief might only come in the second quarter of 2021

Global food prices increased by 3.1% from 2019, the highest it has been in three years, according to the Food and Agriculture Organisation (FAO) of the United Nations. Photo: Getty Images

Consumers might be paying more for food from now until April due to inflated prices driven primarily by bread and cereals, meat, fish, milk, eggs, cheese, oils and fats in the last quarter of 2020.

According to a report by Agbiz chief economist Wandile Sihlobo the cost of bread and cereals increased to 21% in the food basket, a direct result of increasing grain prices.

The price of meat increased by 35% due to the progressive decline in slaughtering numbers towards the end of last year.

Sihlobo also noted that the increase in milk product prices was a seasonality factor. The fats and oil prices, however, were, in part, underpinned by the weaker domestic currency.

Wandile Sihlobo, chief economist at Agbiz. Photo: Supplied

He anticipated that these prices are most likely to drop in the second quarter of 2021 due to the higher than usual rainfall the country would have received by then due to the La Niña weather system.

The award-winning economist indicated that the rain would boost crop conditions not only in South Africa, but across Southern Africa.

“This means there are expectations of a good harvest in Southern Africa,” he said.

However, Sihlobo revealed that the only risk to this view is the tropical cyclone Eloise, which has devasted Mozambique.

It lost its strength when it hit South Africa and other parts of the region with its impact still unknown.

What did Eloise do?

Sihlobo explained “under a scenario of minimal damage on grains in South Africa and Zimbabwe, which would mean an improved crop harvest across Southern Africa, we could see the demand that existed in the 2019/2020 crop declining, thus taking some pressure off domestic crop prices.”

Sihlobo indicated that such conditions would result in South Africa’s grains prices softening, notably, from the current higher levels.

He further predicted that meat slaughtering could slightly improve in 2021 and the base effects on poultry meats, which increased in 2020 partly as a result of an import tariff hike, could also bode well for food price inflation.

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However, he is less optimistic on fats. “The relatively weaker domestic currency and elevated global vegetable oil could mean that oils and fats price inflation could be slightly elevated for some time.

“In terms of fruits and vegetables, the good rains across the country could boost supplies and keep prices broadly steady,” he adds.

The Economic Justice & Dignity Group says they have seen in an increase in prices of staple food. Photo: Supplied/Food For Mzansi

Meanwhile global food prices rose for the seventh consecutive month in a row in December of 2020.

This is according to a report by the Food and Agriculture Organisation (FAO) of the United Nation.

The FAO indicated that the uptick was driven by dairy products and vegetable oils which both faired quite high when compared to other commodities.

The vegetable oil price index gained 4.7% in December to reach its highest level since September 2012.

global food prices rose for the seventh consecutive month in a row, according to the FAO.

The dairy price index increased to 3.2% in December, its seventh consecutive monthly rise, with all categories higher due to strong global import demand induced by concerns over drier and warmer conditions on Oceania’s milk production as well as high internal demand in Western Europe.

As a result, the global food price increased by 3.1% from 2019, the highest it has been in three years.

Other global increases

The FAO indicated that the cereal price index rose to 1.1% from November and for all of 2020 averaged 6.6% above the level of 2019.

Export prices for wheat, maize, sorghum and rice all rose in December, moving higher in part due to concerns over growing conditions and crop prospects in North and South America as well as the Russian Federation.

The meat price index increased to 1.7% in the month of December, while its full-year average was 4.5% below that of 2019.

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Poultry meat quotations rebounded in the final month of the year, buoyed by increased import demand, especially from the Middle East, high internal sales in key producing countries and the adverse impact of avian influenza outbreaks in Europe.

Covid-19, a changing climate, growing global population and rising food prices will have a significant yet uncertain impact on food security. Photo: International Food Policy Research Institute

On the other hand, pig meat prices fell slightly, influenced by the suspension of German exports to Asian markets as a result of African Swine Fever outbreaks.

The sugar price index declined by 0.6% in December after a marked increase during the previous month.

For 2020 as a whole, the sub-index was 1.1% higher than in 2019, reflecting a large surge in imports by China and increased demand for refined sugar from Indonesia’s food and beverage industry even as upward pressure was curbed by improved production prospects in Brazil and India.

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