Consumer food price inflation had started to cool off in some regions of the world, but in South Africa, the opposite was happening, Wandile Sihlobo, the chief economist at the Agricultural Business Chamber (Agbiz) said yesterday.
Data released by Statistics South Africa (StatsSA) on Wednesday showed that consumer food price inflation accelerated to 13.8% year-on-year last month in January from 12.7% in the previous month.
Reacting to the data, Sihlobo said the food product prices that increased notably were bread and cereals, meat, fish, fruit and vegetables.
“These are also the products with a significant weighting within the food basket; thus, we see a notable increase in the headline number. For example, within the food basket, the large weighting of essential 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.
The price increases in bread and cereals reflected a continuation of the pass-through of the price increases that food manufacturers had felt from the higher agricultural commodity prices in much of last year, he said.
There was typically a time lag of roughly three to five months before changes in farm prices showed up in the retail prices of staple grains, hence, while some grain prices started to soften in December last year, retail prices were still going up, he said.
With regard to meat prices, Sihlobo said the higher feed costs and the decline in slaughtering activity due to the widespread foot and mouth disease, continued to be underlying challenges driving up prices. He said this was most pronounced in red meat.
“Meanwhile, the heavy rains that disrupted production conditions in fruits and vegetables contributed to lower supplies of some products in the first month of this year and, subsequently, price increases,” Sihlobo said.
Production costs associated with load shedding might have not been fully factored in the January figures and were likely to show in the coming months.
“We have stated previously that the disruptions caused by power supply interruptions to some food processing companies as well as the associated cost increase all present upside risks to consumer food price inflation. Before this intensified load-shedding period, we thought South Africa's consumer food price inflation would slow to 5.5% - 6.0% in 2023 (down from 9.5% in 2022).”
Sihlobo said they have since revised their view.
“We now see a possibility of a slightly higher figure from these estimates we communicated. However, our updated view will be in the next release when we have a clear sense of the scale of agricultural disruption and the broader food, fibre and beverages value chains. Broadly, the agricultural conditions are favourable for grains and oilseeds. The load-shedding risk and associated costs are high, mainly in fruit and vegetables that are fully produced under irrigation and in the poultry sector, dairy, abattoirs, millers, and various food processors,” he said.
Luigi Marinus, a portfolio manager at PPS Investments, a subsidiary of Professional Provident Society Insurance, said although there was a decline in inflation growth, consumers would be concerned by the 13.4% increase in food and non-alcoholic beverages and the 2.3% contribution to inflation.
“It means that even though food and non-alcoholic beverages make up 17.14% of the inflation basket the contribution was a third of the total inflation increase over the year,” Marinus said.
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