Although inflation hit an upward curve last month, there is plenty of room for optimism, says Agbiz’s Wandile Sihlobo. SA’s consumer food inflation quickened to 9.0% but prices are expected to ease in the coming year helped along by favourable weather.
I imagine most South Africans are already enjoying their well-deserved summer holiday. But I thought it would be helpful to take some time and reflect on the recent inflation data release, specifically the food category.
South Africa’s consumer food inflation quickened to 9.0% in November from 8.8% in the previous month. The product prices underpinning this increase were mainly milk, eggs, cheese, fruit, vegetables and sugar, sweets and desserts.
What we need to focus on
If we dive into details, avian influenza was the main cause of the egg supply constraints, which remain a problem although not as acute as we saw in September and October.
But with interventions underway in the poultry sector, such as importing fertilised eggs to rebuild the parental bird stock lost from avian influenza, importing table eggs (powder and liquid eggs that would help in the baking process and free the whole eggs for human consumption), and the ongoing processes about the possible vaccinations to curb the spread of the disease, it is hopeful that the prices will probably normalise in the coming months.
Furthermore, the eggs have a lower weight within the food inflation basket, at 0.4%, which means their effect may not be as pronounced in an overall inflation figure.
The fruit and vegetable situation
Regarding fruit, the slight price uptick was mainly because of supply moderation after the citrus season. There will soon be a recovery in the supply as deciduous fruit harvest gains momentum.
Moreover, the constraints in the ports for exports could also mean that we will probably see a slight increase in domestic market volumes, thus slightly easing prices.
Regarding vegetables, which remain elevated, potatoes were the main culprit in the basket. The harvest was limited by quality problems related to irrigation disruptions in some fields because of load-shedding in much of the year’s first half.
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Something positive
A recovery in vegetables is expected in the coming months, which will help ease the current upside price pressures. Load shedding has reduced somewhat, and farmers have invested in alternative energy sources, which is helpful for production conditions.
Overall, we remain optimistic that South Africa’s consumer food price inflation will moderate in 2024, although significant risks are worth monitoring, such as the recent increases in grain prices and uncertainty about the weather outlook.
Still, the weather forecasters continue to paint a comforting view that El Niño in the 2023-24 summer crop season will have a mild effect on the sector and thus keep production at decent levels and, by extension, bodes well for food prices.
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Favourable weather forecasts
There are good soil moisture levels across South Africa following several rainy seasons. Furthermore, the weather forecast remains reasonably favourable for the year, with El Niño expected to intensify from March 2024.
The prices of most agricultural products are also influenced by global developments because South Africa is an open economy interlinked with the world markets. Therefore, monitoring global agricultural developments, geopolitics, and energy markets remains essential.
- Wandile Sihlobo is the chief economist at Agbiz and author. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or positions of Food For Mzansi.
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