Mzansi consumers are being pummelled by an all-time high fuel price and escalating food inflation, warns Dawie Maree, the head of information and marketing at FNB Agriculture. He says the March fuel price increase, which kicked in on Wednesday, will have a severe impact on spending patterns, even on food.
This, while the war in central Europe is shaking up the international price of wheat and maize as both Russia and Ukraine are big exporters of these commodities. This will put pressure on local prices.
“We anticipate an upward trend in the consumer price index (CPI) and food inflation in the short term. Food inflation reached 6.2% in the second half of January. The fuel price remains the main driver of higher costs going forward,” says Maree.
Currently, around 80% of South Africa’s grains are transported by road rather than rail. The distance between production, processing and distribution is massive. Maree explains that raw maize is transported to millers in Gauteng and the processed mealie meal is transported back to the rural areas. He believes there is a disconnect between production, processing, and consumption in this case, which add costs to the consumer.
It is difficult to comprehend that food inflation remains high, despite the country being self-sufficient, adds Maree. He says there is currently a good crop on land which should lead to more moderate food prices when harvest pressure starts from the end of April into May, June and July.
Other inflationary drivers are the volatile exchange rate and higher international prices for grains and vegetable oils, particularly palm oil of which the country is a net importer. The unavailability of containers for imports also remains a constraining factor.
Furthermore, the country’s ailing road, rail and port infrastructure as well as bottlenecks negatively impact production and distribution costs. The availability of vegetables was also negatively impacted by excessive summer rainfalls.
Maree expects the upward price trends to continue in the short term. “We may even breach the South African Reserve Bank’s inflation target (3% – 6%) for a short period, but it will then stabilise due to the base effect.”
Meat price moderation
Meanwhile, FNB agricultural economist Paul Makube says the country has had two years of relatively good rainfall resulting in sufficient grass cover. It is expensive to feed livestock, so it pays for farmers to hold them longer on the grass.
Farmers have been rebuilding their herds and are taking advantage of the price growth in the big item meat products. However, farmers cannot keep their livestock in the veld forever.
“Livestock farmers are in the business of growing meat and once it is grown it has to be harvested (slaughtered). This will have a moderating impact on prices. We are coming from a high base, and it is unlikely that we will see prices escalating beyond current levels,” says Makube.
The price for beef T-bone reached R119/kg in January, beef fillet rose to more than R210/kg and mutton and lamb loin chops reached R185/kg. of Beef offal was priced at around R60/kg, an almost 40% year‑on‑year price increase as consumers started opting for cheaper protein products.
Pork prices have come under pressure with a year-on-year decrease of almost 13% for pork fillet and 2.5% for pork chops. Chicken is currently the cheapest of all the meat types and consumers have been benefitting from that.
However, there has been price growth in the chicken market mainly because of the tariff increase that negates the importation of cheaper chicken.
What about fruit and vegetables?
Vegetable prices remained high, mainly because of the excessive rainfall and flooding in certain parts of the country. This prevented farmers from getting into farmland to harvest quickly. It resulted in huge price spikes and increased volatility, says Makube.
Good news for consumers, though, is the downswing in fruit prices where most of the big-ticket items remained in negative territory for at least nine months. The price of pineapples dropped almost 27% year on year in January, followed by a 26% decrease for apples, 21% for oranges, avocados by 15%, and paw paws by almost 7%.
Sign up for Mzansi Today: Your daily take on the news and happenings from the agriculture value chain