Wandile Sihlobo, the Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz), discusses the recent trends in food inflation in South Africa and offers predictions for the future. Key points from his analysis are:
Recent Trends in Food Inflation
South Africa experienced double-digit food inflation from mid-2022 to mid-2023, reflecting a global phenomenon influenced by factors like drought in South America, China’s demand for grains and oilseeds, high energy prices, and the Russia-Ukraine war.
From March 2023, a notable slowdown in consumer food price inflation occurred, dropping from 14.4% to 8.0% by September 2023. The decrease was primarily driven by lower prices for bread, cereals, meat, fish, oils, and fats.
October 2023 saw a minor uptick in consumer food inflation to 8.8%, mainly due to increased prices of milk, eggs, cheese, fruits, and vegetables. This rise is believed to be a short-term reaction to supply constraints.
Challenges and Interventions
Egg supply was significantly affected by the avian flu, while vegetables, particularly potatoes, faced pricing issues due to irrigation challenges caused by load-shedding. Responses include importing fertilized eggs and discussions about vaccinations to stabilize prices.
Eggs have a lower weight in the food inflation basket (0.4%), limiting their overall impact on inflation figures. Anticipated recovery in vegetable and fruit supplies, supported by reduced load-shedding and alternative energy investments by farmers, should ease price pressures.
Optimism for 2024
The expectation is that South Africa’s consumer food price inflation will trend towards moderation in 2024. Contributing factors include lower prices for grain-related products, fats, and oils due to improved global and domestic supplies.
Factors Influencing Food Prices
While meat price inflation is decelerating, a potential increase during the season is expected. Monitoring global agricultural developments, geopolitics, and energy markets remains crucial due to their significant impact on local prices.
Weather and Agricultural Conditions
Favourable weather conditions, including a mild impact expected from El Niño, and good soil moisture levels are positive signs for agriculture. Farmers are increasing the area planted with summer grains and oilseeds, optimistic about the upcoming harvests.
Despite recent fluctuations and challenges, a combination of local initiatives, global market dynamics, and favourable weather patterns leads to an optimistic outlook for moderating food prices in South Africa.