Red meat prices might go down in the next few months while poultry prices might rise. But price trends in Mzansi’s meat industry are uncertain, says Agbiz chief economist Wandile Sihlobo, following the country’s latest inflation announcement.
“The one essential product whose price trend remains uncertain is meat. The recent outbreak of foot-and-mouth disease will likely lead to the temporary closure of some key export markets for the red meat industry, thus adding downward pressure on prices. Conversely, there are fears of a potential increase in poultry product prices, which could somewhat lessen the benefit of softer red meat prices,” Sihlobo says.
Stats SA released the March inflation figures earlier this week, and Agbiz says economists now expect food inflation to average 6% this year, which will be lower than 2021’s 6.5% and the drastic surge in grain prices. Where overall inflation for the country quickened to 5,9% in March from 5,7% in February, food-specific inflation slowed but remains above the overall figure.
“The country’s consumer food price inflation moderated to 6,6% year on year in March from 6,7% in the previous month. This is on the back of softer price increases in fish, milk, eggs and cheese, oils and fats, and vegetables,” Sihlobo says.
He believes the moderation in the “oils and fats” category is temporary as global vegetable oil prices continue to surge and local prices will follow a
similar trend with time. Higher grain prices will also reflect on elevated bread and cereals prices.
But despite he Russia-Ukraine war and the recent floods in KwaZulu-Natal, Agbiz doesn’t foresee a shortage in food; only potential price increases. “There is a sizeable domestic harvest of grains, fruits, and expected import volumes for products that the country typically imports, such as rice, wheat, and palm oil.”
“There are various factors all pushing in opposing directions in the short term. As a result of these dynamics, we now expect South Africa’s consumer food price inflation to increase modestly from readings in recent months, and possibly average 6% year on year in 2022 (from 6,5% in 2021), and not follow the drastic surge that we have observed in grains prices.”
KZN floods ‘hold minimal risk for food security’
In a separate piece following the floods in KwaZulu-Natal, Sihlobo writes that the province is not necessarily the epicentre of agriculture in South Africa, and that the Free State, Gauteng, Mpumalanga, North West and Limpopo hold far more critical positions in the country’s food system. “Therefore, the devastation in KwaZulu-Natal, in the near term at least, holds minimal risks to food security in much of the country.”
Nevertheless, the province is an important contributor to South Africa’s agricultural sector. “Estimates from the Bureau for Food and Agricultural Policy (BFAP) show that around 30% of South Africa’s dairy herd is located in KwaZulu-Natal, and significant volumes of chicken eggs and pigs are produced with a 12% share each. Almost 81% of the country’s sugar is produced in the province, which, if products are not produced and transported, will have economic consequences for the entire industry.”
The province also processes roughly 8% of the 11.5 million tonnes of maize consumed in South Africa each year, and approximately 21% of the wheat.
“The numbers vary per product, but the point here is that food supply chains are not concentrated in one particular province.”
With the Durban port being an important passing point for imported and exported agricultural products, amongst other goods, Sihlobo says the cross-border movement of goods may be affected.
He adds, however, “To people who might have questions about whether the destruction could have spill-over to much of South Africa’s food security, my initial thoughts are that if the government, Transnet and logistical role players continue working effectively at finding alternative routes to the port, as is the case at the present moment, then we should not have a near-term food security concern for the country.”
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