Despite consumer price inflation for October surprising to the upside, Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo said yesterday overall they remained optimistic that South Africa’s consumer food price inflation would return on a moderating path going into the next year.
Statistics South Africa (Stats SA) said yesterday that the annual headline CPI quickened more than expected in October, rising to 5.9% from 5.4% in September and well above the Bloomberg market consensus of 5.6%.
The inflation for food and non-alcoholic beverages (NAB) accelerated for a second consecutive month, rising to 8.7% in October from 8.1% in September and 8.0% in August. The 1.5% monthly rise was the highest since January this year (1.8%).
Sihlobo said: “The product prices underpinning this increase were mainly milk, eggs and cheese; fruit; and vegetables. For all these products, the recent price rises will likely be a temporary blip. They are a reaction to brief supply constraints in the past few months.“
However, Nkhensani Mashimbyi, an agricultural economist at Absa Agribusiness, warned that South African consumers’ disposable income would remain under pressure, limiting price increases on food prices, such as red meat.
Mashimbyi said the stubborn inflation supported the central bank’s hawkish notion of leaving interest rates higher for longer and for agriculture, this would lead to high debt servicing costs that would likely remain in the next year.
“Vegetable inflation rose from 15.3% in September to 23.6% in October. This rise was driven by firmer prices across multiple vegetable products. For potatoes specifically, lower supply, due to lower plantings and climatic issues, have supported year-on-year and month-on-month price increases in October. In contrast to this, meat price growth remained limited due to constrained consumer income,” Mashimbyi said.
Thabile Nkunjana, the senior economist and acting manager at the Trade Research Unit of the Markets and Economic Research Division within the National Agricultural Marketing Council (Namc), said obvious products once again contributed to the small increase in October compared to September.
“These included vegetables, which were up 7.1%, headed by potatoes and onions, fruit, up 5.8% month on month, and animal product mostly eggs, milk, and cheese. The avian influenza was the primary cause of egg price increases during October, although numerous actions are being implemented to mitigate the issues both by government and the industry.
“Potato prices were impacted by limited availability following a fall in production and poorer yields due to irrigation issues caused by power outages,” Nkunjana said.
Since supply was the key challenge for vegetable products, an increased supply would significantly cut current costs. Potato availability should be improving at this time of year, which should help consumers get through the end of the year, the marketing council said.
Nkunjana said more eggs were entering the country as methods of expanding local supply were being explored. This followed the avian influenza outbreak in South Africa, which resulted in the culling of millions of layers, hence the limited egg supply.
Namc said positive developments presently were that grain products, such as bread and maize, have not increased significantly in recent months.
“This is backed by generally optimistic expectations for grains and oilseeds, but there is concern over supply chains due to increased geopolitical tensions and potential spillover from the present crises between Israel and Palestine, and Russia and Ukraine."
However, Nkunjana said of concern was the situation in India, where export limits on wheat and rice remained in place. He said that given India’s importance in the worldwide market for these commodities, the forthcoming elections were projected to result in unpredictable policy moves, which presented risks for the global grain market.
“Aside from the potential risks mentioned above, food prices will likely normalise in the early months of 2024, but prices in the coming weeks may be somewhat similar to current levels due to demand around this time of year, and this should vary by product due to the uniqueness of factors that can affect each product.”
BUSINESS REPORT