We are ending this year with food price inflation – the rate at which prices are increasing – cooling off the levels we have not seen in years. For example, having stabilized at 4,1% in September 2024, South Africa’s consumer food price inflation slowed notably to 2,8% in October. This is the lowest level since May 2019. The deceleration was broad-based, except for “sugar, sweets and desserts”, which lifted somewhat.
The slowdown was largely driven by base effects, as food price inflation was elevated this time last year. For example, this time last year, grain prices faced upward pressure following India’s rice export ban, while an avian influenza outbreak constrained egg supplies, exacerbating price risks.
We are far from that worrying reality, as India has resumed rice exports, and prices have slowed generally. Moreover, South Africa’s poultry product supplies have normalized. This time last year, there were risks of higher poultry product prices as avian influenza spread in various regions of the country, leading to constraints on egg supplies.
Also worth noting is that the recovery in vegetable supplies across various fresh produce markets in the country also added to the softening of prices. We had a brief period of elevated vegetable prices following the black frost in Limpopo, which damaged some potato fields. Fortunately, the supplies are now recovering.
We suspect that the generally lower wheat prices have also added to this moderation of prices. There are ample global wheat supplies, which have kept prices generally under pressure.
Upside risks to prices
While having eased notably in October 2024, grain-related products remain the upside risk to consumer inflation following a poor crop harvest due to the drought. For example, South Africa’s 2023-24 maize harvest is estimated at 12,72 million tonnes, down 23% year-year.
This sharp decline in harvest signifies the harsh impact of the 2024 mid-summer drought, and the regions most affected were the white maize growing areas, a staple crop that is also scarce in the world market. Thus, white maize prices have rallied in recent months. The additional challenge is the continuous demand for white maize from the Southern African region through the first quarter of 2025.
That said, we don’t expect the potential grain-related product price increase to be substantial as the forecasts from the International Grains Council signal the possible ample global wheat and rice harvest in 2024-25, which could cushion the region as substitutes.
Favourable weather prospects bode well for food prices
Also worth noting is that South Africa is approaching a generally favourable agricultural season on the back of expected La Niña rains. Various regions have already started planting and have received a fair amount of rain that improved soil moisture.
The farmers are also optimistic and plan to plant a slightly bigger area for summer grains and oilseed. For example, the data released by the Crop Estimates Committee last month showed that South African farmers intend to plant 4,47 million hectares of summer grains and oilseeds in the 2024-25 season. This is up mildly by 1% from the previous season.
Overall, South Africa’s food price inflation has slowed notably, and the forecasts for 2025 are generally favourable. The only main risk in the near term is the higher grain prices, specifically white maize, due to tight supplies following a poor 2023-24 harvest. Still, this will be short-lived, and the new 2024-25 production season looks promising and will help slow the food price inflation in the later months of 2025.
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