South Africa’s consumer food price inflation accelerated further to 11.5% year-on-year (y/y) last month, from 10.1% the previous month.
This increase was the fastest since January 2017, which was a drought period in agriculture that saw costs driven by higher agricultural commodity prices.
Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo said yesterday that the higher agricultural commodity prices observed in the months since Russia invaded Ukraine continued to filter into the consumer food price inflation data. Above that, the higher fuel price inflation since the start of the war was an additional cost driver of food prices.
“More specifically, the higher global grain and oilseed prices for much of this year have been the drivers of the costs of “bread and cereals” and “oils and fats” in the consumer food price inflation basket. These were also among the key drivers of the price inflation in August, alongside vegetables, sugar, sweets and desserts.
“Notably, these are also products with a relatively higher weighting within the food basket. For example, within the food basket, the key products are meat (35%); bread and cereals (21%); milk, cheese and eggs (17%); vegetables (8%); sugar, sweets and desserts (4%); oils and fats (3%); and fruit (2%),” Sihlobo said.
With regards to fruits and vegetables, he said the uptick registered in August was a monthly blip caused by a temporary decline in volumes in the fresh produce markets across the country.
The chief economist said that generally South Africa had a sizeable harvest, and the disruption in fruit exports within the Black Sea region and the EU could add downward pressure on domestic prices, which bodes well for consumers in the near term.
Sihlobo said the one product where price trends remained uncertain was meat, although prices moderated somewhat in August.
“The outbreaks of foot-and-mouth disease have led to the temporary closure of some key export markets for the red meat industry. Ordinarily, this would add downward pressure on prices as it implies that we would see an increase in domestic meat supplies. But this time around, the spread of the outbreak is vast, to the extent that we might see a decline in slaughtering in major feedlots, which would ultimately keep red meat prices at relatively higher levels; the opposite of what we initially anticipated,” he said.
The global grain and oilseed prices, which have been the major drivers of the surge in inflation, were starting to soften, which showed in the global indices.
“The FAO’s Global Food Price Index was 138 points in August 2022, down by 2% from July and registering its fifth consecutive monthly decline led by a price drop in all products. These global developments are also showing in South Africa, and this could also reflect on the consumer food price inflation data in the coming months. Therefore, we continue to expect the domestic consumer food price inflation to start moderating towards the end of 2022,” Sihlobo said.
Last week, Statistics South Africa said annual consumer inflation dipped to 7.6% in August from 7.8% in July.
BUSINESS REPORT