I noticed some headlines about “falling world food prices” and thought I should comment. These articles do not necessarily refer to “retail food prices”; they are primarily about agricultural commodity prices, measured in the FAO’s “global food price index.”
So why do I care about all of this? I care because when people read about “falling global food prices” and do not see them at their local retailers, they start thinking someone is taking chances and blame retailers.
So, we must stress that these are global agricultural commodity prices. These commodities must first be processed and distributed, among other things, which adds costs.
Also, we don’t all shop at one big global retail, so things differ from country to country, region by region, and so on.
So this is what happened — last week, the FAO released its global Food Price Index, a measure of the monthly change in international prices of a basket of food commodities, for January 2025.
The index was at 125 points, down 2% from the previous month and 22% below its peak in March 2022. This peak occurred after Russia invaded Ukraine, and there was heightened uncertainty in the grain markets.
The mild monthly easing in prices was not widespread but only in a few commodities: sugar, vegetable oils, and meat. This is broadly due to slowing demand after the festive season and promising production prospects for vegetable oils.
For fellow South Africans, we must continuously monitor these global developments as we are interlinked to the world agricultural markets.
However, our key import commodities are wheat, rice, and some vegetable oils. Due to ample supplies, the prices of these commodities are moderating, which benefits importers like South Africa. This is a welcome development and bodes well with the generally moderate food price inflation in South Africa.
As a reminder, South Africa ended 2024 with lower consumer food price inflation, at 1,7% in December 2024.
Again, this broad post isn’t about inflation per se, but an emphasis that this “global food price” story mainly refers to agricultural commodity prices, which have a leg before they show at the retail level.
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