Food prices have been in the headlines globally, but in South Africa, the situation is clear; we are food secure at the national level, but struggle with food insecurity at the household level. The primary challenge in our assessment is income poverty, not the lack of availability or expensive products. But that is not what I want to explore further now (you can read more here).
I want to comment briefly on consumer food price inflation data. However, one clarification is essential before we do so: we must never forget that relatively lower inflation does not equate to lower prices. Inflation is the pace of price increases.
Now that we have that out of the way, the data released today by Statistics South Africa shows that consumer food price inflation accelerated to 3.3% in April from 2.2% in the previous month.
This increase was underpinned by the rise in price inflation of most food basket products, most notably cereal products, meat, oils and fats, and vegetables. This is unsurprising and reflects the pass-through of the higher agricultural commodity prices we observed at the end of last year and into the start of 2025, particularly with grains.
In the case of meat, price increases are expected as a response to the slight recovery in consumer demand, which we have been highlighting over recent months. In the case of vegetables, we see the increases as a reflection of disruptions in field work caused by the excessive rains in recent weeks, which should be a temporary blip.
Looking ahead, we suspect that the current mild quickening of food price inflation will prevail for much of the year’s second and third quarters as the increases in the farm level of some of the key products, such as grains, continue to pass through to the retail level.
While grain prices have softened recently, they were elevated for much of the last quarter of 2024 and into the start of this year because of the tight maize stocks. There is generally a lag of three to five months before the increases at the farmgate begin to show at retail levels.
Thus, while grain prices have now softened in anticipation of an ample harvest in the 2024-25 season, we will continue to see a different price direction in the food inflation basket for months. Still, we don’t anticipate that the increases will be as sharp as the wheat and rice prices, which are other key cereals that have generally seen prices softening in the past few months.
Regarding vegetables, the recent price increases partly reflect some regions’ challenges with harvesting because of extra wet conditions. As such, we expect the prices to normalize in the coming months. Importantly, vegetables and fruits don’t have a longer price lag than grains.
In the case of meat products, the price direction may soon change because of the potential increase in domestic supplies. A foot-and-mouth disease outbreak is temporarily closing some key export markets and likely raising domestic red meat supplies.
The counter factor to this possible moderating trend could be poultry prices. South Africa imports roughly 20% of its annual poultry consumption, and over two-thirds of imports from Brazil. There is now an outbreak of avian flu in Brazil, which could limit their poultry exports.
Under such a scenario, the key determinant will be whether South Africa can boost domestic supplies or source additional imports from other regions. We suspect this may have slight upside pressures. Still, we think meat price inflation may be sideways to slowing.
South Africa’s headline CPI was 2,8% in April 2025, down from 2,7% in March.
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