A recent survey done by Grain South Africa show that farmers in the Free State, Mpumalanga, North West, Limpopo, and KwaZulu-Natal ranked excessive rains as their biggest risk to crops this year.
Food prices often dominate the headlines in South Africa this year. On several occasions this year, some people questioned the rise in South Africa’s consumer food price inflation in a year of abundant agricultural harvest.
In a year of large crop harvests following good rainfall, a few people probably thought consumer food price inflation would accelerate as we have witnessed in the past ten months, averaging 6,6% y/y (compared with 4,5% y/y in 2020).
South Africa is now ranked 70th in the Global Food Security Index out of 113 countries, slipping from position 69 in 2020 and 44 in 2019. At face value, this decline is quite concerning. However, when one looks at the Index scoring’s technical position, it becomes clear that South Africa is not doing as badly as the “headline” ranking suggests.
South Africa’s consumer food price inflation continues to surprise on the upside. We thought the start of the second half of the year would moderate the increase we observed in the past few months. But the data released by Statistics South Africa today show that consumer food price inflation accelerated to 7,4% y/y in August 2021 after registering 7,0% in the previous two months. This is the highest level since March 2017.
Although July 2021 consumer food price inflation of 7% y/y is unchanged from the previous month, there are clear signs in the underlying details that pressures are beginning to moderate.
The global agricultural commodity prices in the second half of the year could continue softening slightly from the level of recent months. If this transpires, South African grain prices should follow a similar path, which bodes well for consumer food price inflation.
With ample agricultural harvests, why is South Africa still seeing food prices rising – and what is the outlook for the rest of the year?