Global grain supplies are comfortable; thus, prices have continued to moderate. For example, the Food and Agriculture Organization of the United Nations Cereals Price Index, which measures the monthly change in international prices of grains, averaged 111  points in March 2024, down 3% from its February level and 20% below its March 2023 value.

The broad moderation in grain prices underscores improved global supplies in the 2023/24 season. For example, the International Grains Council (IGC) forecasts the 2023/24 global maize harvest to be 1.2 billion tonnes, which is up 6% year-on-year.

Moreover, the IGC forecasts the 2023/24 global wheat harvest to be 789 million tonnes, well above the long-term average.

There is a lot of rice globally, with the 2023/24 global harvest forecast at 511 million tonnes, well above the long-term average.

South Africa focus

So, could the ample maize supplies in the global market cushion South Africa? The challenge is that most global maize supplies are yellow maize. At the same time, the demand in South Africa, and indeed, in Southern Africa, will be white maize.

There are notable crop failures in the western regions of South Africa, which are primarily white maize-producing regions. At the end of March, the estimates from the Crop Estimates Committee placed South Africa’s 2023/24 white maize harvest at 6,3 million tonnes (down 25% y/y). While a sharp decline, this will still meet the domestic needs if it materializes.

The primary challenge, however, is the growing demand from Southern African countries that have experienced significant crop failures.

This demand, along with the decline in the domestic harvest, has led to a surge in domestic white maize prices in the recent past. White maize trades at around R5 200 per tonne, while yellow maize is around R4 200 per tonne.

But not all things are bad

Still, the upbeat global grain production could benefit South African consumers, mainly through wheat and rice imports. However, one aspect that one should watch closely is the exchange rate. The exchange rate matters as South Africa imports roughly half of its annual wheat. And South Africa imports all of its rice consumption.

Consumer inflation dynamics

Another major factor driving South Africa’s food inflation this past year was the increase in prices of vegetable and poultry products. The poor harvest caused the vegetable price increases after load-shedding at the start of the year, undermining crop quality.

Things have changed this year. While it has been quite dry across the country since the beginning of February 2024, vegetable production has not taken a strain because all commercial production in South Africa is under irrigation, and load-shedding has not been intense.

Moreover, meat prices rose at the end of 2023 due to supply constraints of poultry products on the back of avian influenza. But there is now anecdotal evidence that the restocking process is underway and there is improvement in the poultry products supplies. Therefore, the risks of further price increases have subsided somewhat.

Overall, there is increased uncertainty about South Africa’s consumer food inflation path for 2024. However, the underlying factors are not all one-sided, and one has to reflect on the price movements and weighting of various products when considering their food price forecast for the year.

Indeed, the global grain price outlook remains reasonably positive.

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