Good news for food prices in South Africa

South Africans can breathe a sigh of relief as experts predict that food inflation is set to decelerate this year.

Consumers have been facing a tough economic climate, with inflation, interest rate hikes, and load shedding all taking their toll.

According to Stats SA, Consumer Price Inflation ticked upwards to 7.1% in March from 7.0% in February, despite many experts predicting a decline.

The 14.0% year-on-year increase for food and non-alcoholic beverages was one of the biggest contributors to the overall inflation rate, contributing 2.4 percentage points to the total.

The increase was the largest annual increase since March 2009 (14.7%).

In March, the sweets and desserts; fruits and vegetables; and the product category ‘other food products’ all saw massive upward inflationary pressure, while the milk, eggs & cheese product group saw its annual increase reach 13.6% from the recent 3.7% low in April 2022.

Consumers will have some respite as food inflation is expected to ease in South Africa.

“We expect the prices for a majority of food items to start decelerating in the next 12 months,” Dawie Maree, Head of Information and Marketing at FNB Agribusiness, told BusinessTech.

“Although prices may not drop entirely, food inflation is likely to decline.”

However, Maree said that FNB Agribusiness expects the prices for some foods to drop, such as grains, thanks to an excellent crop and the easing of international prices.

“We expect an easing on food inflation from the second half of the year, although it will be very much dependent on energy/fuel prices and possible price shocks on the international level, given the impact of the exchange rate. The probability of the latter is low at this stage.”

Despite the easing of food inflation, consumers should not expect an immediate easing in prices as businesses continue to feel the effects of load shedding.

“Businesses/retailers have absorbed a lot of the costs as a result of load shedding, but they will only be able to do so up to a certain point, and then these may likely be transferred to consumers. In that respect, we shouldn’t expect a respite in prices.”

“Retailers are already spending millions of rands on diesel just to keep their stores open during load shedding.”

Meat price positives 

In other positive news for consumers, the Bureau for Food and Agricultural Policy (BFAP) said that meat prices should start to decline over the next few months.

According to BFAP’s Food Inflation Brief for March 2023, meat prices will ease as international prices take a downward turn and local costs decline.

Moreover, the decline in grain and oilseed prices is good news for the livestock industry’s feed prices.

That being said, BFAP said that biosecurity issues have continued to affect beef exports, resulting in depressed weaner prices.

“The extended period of high feed prices, combined with the biosecurity challenges, has led to reduced stocking and slaughter volumes through January and February were well below that of a year ago,” it said.

Carcass prices, however, are down, which should reduce retail prices over the next few months.

“At the retail level, dynamics differ amongst the various cuts – significant additional costs in the chain are being passed through more successfully for top-end cuts, where consumers are typically more affluent, while prices of lower-priced cuts have come under more pressure,” the group said.

For instance, prime cuts, like fillet and sirloin, have seen prices grow by more than 30% year-on-year.

When it comes to all food, just like Maree, the BFAP said that it expects prices to ease in the second half of the year as lower commodity prices start to filter through the retail market and high-base effects come into play during May.