The pace of an increase in South Africa's consumer food prices continues to slow. (Waldo Swiegers/Getty Images)
The pace of an increase in South Africa’s consumer food prices continues to slow.
The recent data from Statistics South Africa shows that it slowed to 4.4% year-on-year in April 2024 and from 4.9% in the previous month.
This moderation in inflation was underpinned by the deceleration across most food products, except for fruit and vegetables, which lifted mildly from the last month. The uptick in fruit and vegetables is mainly a result of base effects, but these increases should remain mild because supplies of most products are abundant.
A closer look at other major food products in the food basket shows the moderation in meat prices. This reflects an improvement in meat supplies after some constraints at the end of 2023 because of avian influenza. There is now anecdotal evidence that the restocking process is under way, and there is improvement in poultry product supplies nationwide.
Moreover, the prices of rice and vegetable oils have continued to moderate as a result of increased global supplies — South Africa is a significant importer of these products.
The wheat prices are also relatively lower than last year, although we have seen a price rally recently.
Global agricultural production
At the end of last year, when India, a significant role player in global rice production and exports, limited its exports, there were concerns about a long-lasting price increase. Indeed, in the months towards the end of 2023, global rice prices rallied, causing food security concerns.
But we now see some moderation, which reflects the reasonably higher supplies in various other major rice producers, and that supply changes have adjusted somewhat since India’s decisions.
The prospects for the new season are also comforting. The United States department of agriculture estimates the 2024-25 global rice production at 527 million tonnes, up 2% from the previous season. This is on the back of the expected large crop in Asia.
In the case of wheat, the supplies globally remain plentiful, and the new season is promising. For example, the US department of agriculture forecasts the 2024-25 global wheat harvest to be 798 million tonnes, up 1% from the previous season. The bigger harvests are expected in Canada, Australia, the US, Kazakhstan, and China.
Regarding global vegetable oil supplies, the US agriculture department forecasts the 2024-25 global soybean harvest at 422 million tonnes, up 6% year-on-year. This improvement is a result of the expected large harvest in Brazil, Argentina and the US.
The global sunflower seed production is also at 57 million tonnes, roughly unchanged from the 2023-24 season.
Still, the exchange rate will also matter much in the months ahead, because South Africa imports ample wheat, rice and palm oil.
Overall, there remains increased uncertainty about South Africa’s consumer food inflation path for 2024, with some upside risks in various products.
Still, the underlying factors are not all one-sided, and one has to reflect on the price movements and weighting of multiple products when considering their food price forecast.
The primary concern remains the grains-related products in the food basket because of the poor domestic white maize harvest and the potential upside pressure on prices. South Africa’s white maize harvest is down 25%, estimated at 6.4 million tonnes in the 2023-24 season. The risks of other food products are less pronounced, and recent price developments reflect this view.
Wandile Sihlobo is the chief economist at the Agricultural Business Chamber of South Africa and a senior fellow in Stellenbosch University’s Department of Agricultural Economics. His latest book is A Country of Two Agricultures.