Food prices are unlikely to come down dramatically any time soon, Absa AgriBusiness said on Friday.
While this was bad news for consumers, it was good news for the country’s agricultural industry.
”Agriculture in this country is healthy and will continue to be so, in the future.
”It is a major support-pillar of our economy, contributing about 1,5% of GDP [gross domestic product],” said Ernst Janovsky, general manager of Absa AgriBusiness in a statement.
He added that despite the current global downturn and the reduction in fuel costs, demand for food would remain high and prices would continue to be bolstered by world governments’ spending.
He warned that South Africa’s agricultural sector should not be seen in isolation.
”Consumers in countries that experience booms, such as China and India, have acquired a taste for poultry and meat.
”They may settle for cheaper cuts when they feel the pinch, but they will not dump these products.”
He said as a result, the demand for grain as animal feed would remain high and possibly increase further.
Janovsky said South Africa’s agricultural market was governed largely by overseas factors and local prices were dictated by prices obtained on the international market.
”South Africans will always pay a price that falls somewhere between the import and export cost of any particular commodity.”
He said when a product was scarce in South Africa, local farmers would sell it at the price it would cost to import it.
Conversely, when there was abundance, no producer would sell for less than the price they could get on the world market.
”In addition, about 70% of any farmer’s input costs — fuel and fertiliser for example — are imported costs, over which there is no control and which are also subject to fluctuating exchange rates,” Janovsky said.
”That alone will keep local food prices high.” — Sapa