South Africa’s annual consumer price inflation has eased for the fourth consecutive month, reaching 3.8% in September, down from 4.4% in the previous month.
This reduction marks the lowest inflation rate recorded since March 2021, primarily driven by falling fuel prices, according to the statistical agency Stats SA.
However, the reprieve in inflation appears to come with caution, as food inflation continues to display mixed trends.
Economist from Grain SA, Marguerite Pienaar yesterday highlighted a complex food landscape, where vegetable, fruit, cold drink, and fish prices have increased. Conversely, staples like milk, eggs, and cheese have remained relatively stable.
Pienaar said the softening of annual rates recorded for meat, bread, cereals, oils, and fats indicated an intriguing dichotomy in the food market.
She elaborated on the challenges faced by grain-related products, attributing their continued high prices to poor crop yields stemming from a severe drought earlier this year.
The 2023-24 maize harvest is forecast at 12.8 million tons, representing a staggering 22% decline from the previous year. White maize, crucial for a significant portion of the population, has seen prices spike by 28.5% year-on-year due to this shortfall.
“Extreme weather conditions have played a pivotal role, leading to a 15.2% decrease in yellow maize, an 11.7% fall in sunflower production, and a striking 34.6% drop in soybean production,” Pienaar explained.
Looking ahead, Grain SA forecasts a shift with more moderate weather patterns and larger global grain harvests expected in 2024-25, indicating that grain prices may decrease, thus providing some relief to consumers.
Nkhensani Mashimbyi, an agricultural economist at Absa AgriBusiness, added another layer of complexity by noting that food inflation remained at 4.1% in September.
According to Stats SA data, the primary contributors to this food inflation increase are bread and cereals, vegetables, and fruits.
Mashimbyi said the growth in grain product prices largely persisted due to high maize prices exacerbated by the yield decline linked to the El Nino weather phenomenon.
“For vegetables, the black frost event in July caused crop damage to potatoes, reducing supply volumes which supported prices. Higher fruit prices driven by citrus, in turn, are edging up due to a favourable juicing market,” Mashimbyi said.
“This is causing some of the class 2 and class 3 fruit, that would have been sold in the local market, to be diverted into juicing.”
Daneel Rossouw, head of sales for agriculture at Nedbank Commercial Banking, underscored a broader trend as food price inflation has been on a declining trajectory over the past two years, with current levels significantly lower than those observed in 2022/23.
Nevertheless, Rossouw acknowledged a moderate upward trend in fish, fruit, and vegetable prices, primarily due to weather-related supply constraints.
“While the current food price trends raise concerns, we do not foresee significant issues leading up to the festive season,” he said.
Meanwhile, Thabile Nkunjana, a senior economist at the Trade Research Unit of the National Agricultural Marketing Council (Namc), warned that, reminiscent of the challenges faced during the 2016/17 production season, the drought of the current summer crop may again lead to a spike in food prices through to early 2025.
Nkunjana cited a staggering 52.4% year-on-year increase in the average price of a ton of white maize between September 2023 and September 2024, along with notable annual increases across essential food items such as vegetables and animal products.
“Food inflation is also being driven up by other essential food items, such as vegetables, which were 6.8% higher than the same period last year led by potatoes, followed by bread and cereals, which were 5.4% higher year over year in September, and animal products, such as milk, eggs, and cheese, which were 6.9% higher year over year,” Nkunjana said.
Despite these pressures, Nkunjana noted the recent decision by India to lift its rice export ban, which could provide much-needed relief for consumers, especially lower-income households heading into the holiday season.
Yet, he cautioned about the looming possibility of rising food inflation, particularly should fuel prices climb once more.
BUSINESS REPORT