The supply chain and logistics crisis currently rippling around the world could significantly ramp up prices of imported agricultural commodities to Mzansi. Industry experts say this – together with additional economic factors – could leave consumers to pay steeper prices for some food items in coming months.
Global shipping disruptions are largely driven by Covid-19-related interventions that jolted the intricate system out of balance. Worldwide, access to cargo containers, the clogging of containers in port yards and massive rises in shipping rates have been felt.
In South Africa, food producers are coming face to face with alarming price increases in input costs such as fertiliser, agricultural chemicals and seeds.
According to agricultural economist Lunathi Hlakanyane, the global container shortage will impact a proportion of agricultural goods and commodities that Mzansi imports.
Any further delays in delivery into the local market, Hlakanyane cautions, could hypothetically beef up the prices of imported goods.
“For example, if there is an agri commodity that we are importing and there is a bit of shortage of that commodity in the global market… that tends to ramp up prices, especially if we don’t have capacity locally to supply that commodity.”
When this happens, Hlakanyane explains, chances are that the consumers will have to cough up much more for food.
Cost of production on the rise
John Hudson, the national head of agriculture at Nedbank, says the current global crisis in supply chains and logistics might affect the average consumer in South Africa too.
“The disruption in global supply chains is resulting in input costs such as fertiliser, agri chemicals and seed to go up quite alarmingly and this will lead to an increase in the cost of production going up and a margin squeeze for farmers.
“Unfortunately, this may well lead to an increase in food prices, and we have already seen food price inflation starting to pick up.”
Hudson adds that we need to look at other factors as well, such as yield and international commodity prices – all of which will have a bearing on local prices paid to farmers.
“As things stand, we are hopeful for a favourable production season, but overall there is concern around margin squeeze and the impact this could have on commodity prices and ultimately the price local consumers will pay for food in the coming months.”
Is there reason for panic?
Furthermore, Hudson explains that even though our supply chain and logistics issues in South Africa are not as severe as we have seen globally, our port facilities and railroads are struggling, which may lead to food inflation.
“Our rail and port facilities and efficiency are not up to scratch. Add to this the electricity dilemma and this hampers the effectiveness of the entire supply chain, both local and export.”
These are critical areas which require increased focus and investment if South Africa is to remain competitive from a supply chain perspective, Hudson reckons.
“The other concern currently is the steep increase in fuel prices, which does not bode well for farmers or the logistics chain and all of this could put pressure on the cost of producing food and in the supply chain. If inflation continues to rise, it may also lead to an increase in interest rates and all of this will weigh down on all of us.”
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