After a prolonged period of much higher food price inflation, the recent data paint a welcome picture of notable easing. South Africa’s consumer food price inflation slowed to 3.9% in July 2024, from 4.1% in the previous month. This is the lowest level since January 2020 and was underpinned by the continued moderation in price inflation across most products in the food baskets, except for bread and cereals and meat.
South Africa’s food price inflation — the rate at which food prices increase — has been moderating since the start of the year. But in recent months, I feared that the rise in the prices of bread and cereals and meat products would change the direction of food inflation to a slight uptick.
Positively, they have been fairly outweighed by the continued moderation of other products. The slowing price inflation in products such as oils and fats, milk, eggs and cheese, fruit, and vegetables is a result of increased supplies and, to an extent, the stronger rand to the dollar helps in the case of imported vegetable oils.
With that said, I continue to monitor the prices of bread and cereals, and I believe the prices may increase in the coming months. The challenge arises from the mid-summer drought that led to a 19% year-on-year decline in maize production to an expected 13.34 million tonnes. White maize production is forecast at 6.35 million tonnes (down 26% year-on-year), and yellow maize at 6.99 million tonnes (down 12% year-on-year). Given the scale of the decline in the white maize harvest and the expected strong demand from Southern Africa, I expect white maize prices to remain reasonably elevated for some time and thus sustain the increases in bread and cereal products in the food basket.
But I do not expect the potential price increase to be substantial as the forecasts from the International Grains Council signal the possible ample harvest in the world. For example, the 2024-24 global wheat and rice production are estimated at 799 million tonnes (up 0.6% year-on-year) and 528 million tonnes (up 1.2% year-on-year), respectively.
South Africa imports nearly half of its annual wheat consumption, about 1.5 million tonnes yearly. Additionally, South Africa imports about a million tonnes of rice each year. Favourable global production conditions of these grains in the 2024-25 season and the possible subsequent price softening would be welcome developments in an importing country like ours. Moreover, the relatively firmer domestic currency will also help ease the costs of imported foods. This is a benefit for these grains and imported vegetable oils such as palm oil.
Beyond these grains, the meat price increases could remain mild in the coming months. The weak consumer demand remains a problem, particularly for red meat, and this could keep meat prices in check.
Because of bread and cereals and meats’ more significant weightings in the food basket, their price increases, if sustained, may change the direction of the headline food price inflation from moderation to a mild uptick in the coming months. Still, this should remain at relatively comfortable levels, not the major increases we saw last year.
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