by Wandile Sihlobo | Dec 11, 2024 | Food Security
Well, the price surge is not only in “orange juice”. Coffee prices also continue to increase and hit a record high this week. The underpinning problem is the same for both “orange juice” and “coffee” – and that is bad weather in South America (Brazil), the major orange juice and coffee producer and Vietnam (in the case of coffee).
These problems may last for some time. In 2025-26, Brazil’s coffee harvest may again be poor, leading to another lower global stock. I read that “Volcafe also projects a global 2025/26 arabica coffee deficit of 8.5 million bags, wider than the 5.5 million bag deficit for 2024/25 and the fifth consecutive year of deficits.”
The orange juice may have similar challenges. Brazil, the leading producer, faced drought and pest infestation, and recovery will take some time. The various analysts who look closely at this matter, more than me, are generally bullish that we may see prices at these levels for some time.
If the prices remain at these levels, as we expect, the coming year may again be reasonably good for South African citrus farmers. We need a few good years of better prices (for growers. Sorry, consumers – me included).
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by Wandile Sihlobo | Dec 11, 2024 | Food Security
I know people often forget what they paid for groceries a few months ago, let alone last year. Things seem to be getting expensive every day, especially with our tough economic conditions in South Africa.
Still, I think it is essential to highlight welcome data developments when we see some. We are ending this year with food price inflation – the rate at which prices increase – cooling off the levels we have not seen in years.
For example, after slowing to 2,8% in October 2024, South Africa’s consumer food price inflation decelerated notably to 1,6% in November, the lowest since October 2010.
The slowing down was broad-based, except for “oils and fats” and “fruit”, which lifted slightly. As with the previous month, the slowdown was partly driven by base effects, as food price inflation was elevated this time last year. For example, this time last year, vegetable prices were elevated because of supply constraints due to load-shedding-related disruptions in some fields.
Moreover, the avian influenza outbreak constrained egg supplies, exacerbating price risks. This was also the case with meat. Thus, this time around, the supply has improved, and the challenges we faced last year have eased. It is for this reason that both vegetables and meat were in deflation in November 2024.
Also worth noting is that grain prices faced upward pressure last year following India’s rice export ban. This year, India resumed rice exports, and prices slowed generally. We suspect the lower wheat prices have also added to the moderation of grain-related product prices.
While having eased remarkably in November 2024, grain-related products remain the upside risk to consumer inflation following a poor crop harvest due to the drought.
Still, we don’t expect the potential grain-related product price increase to be substantial as their forecasts point to the ample global wheat and rice harvest in 2024-25, which may cushion the region as substitutes.
While we highlight these risks, the outlook is somewhat comforting. The potential recovery of agriculture in 2025 because of the expected La Niña rains will help to keep food inflation contained.
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by Wandile Sihlobo | Dec 6, 2024 | Food Security
There will probably be a few headlines today about “rising world food prices”. However, those articles will primarily be about agricultural commodity prices, which are measured in the FAO’s “global food price index”, not necessarily retail food prices.
The increase in the recent month is not widespread but in a few commodities – dairy and vegetable oils. We see declines in meat, cereals, and sugar prices. But these were overshadowed by the dairy and vegetable oils. Thus, the overall headline of the index is up slightly in November compared to the previous month.
The FAO’s global Food Price Index, a measure of the monthly change in international prices of a basket of food commodities, increased by 0,5% in November 2024 from the previous month to 127 points. This is its highest value since April 2023. Dairy products and vegetable oils mainly underpinned this increase. The FAO’s Food Price Index is now 6% up from November 2023.
Still, the current reading of the Food Price Index is 20% below its peak of 160.2 points reached in March 2022.
As South Africans, it is always essential that we monitor these global developments. However, our key import commodities are wheat, rice, and some vegetable oils. The prices of wheat and rice are moderating due to ample supplies, which benefits importers like South Africa.
As I stated, vegetable oils are increasing. Still, these aren’t aspects to worry about for now as we consider domestic food price dynamics.
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by Wandile Sihlobo | Dec 3, 2024 | Food Security
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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by Wandile Sihlobo | Nov 30, 2024 | Food Security
Maize is essential for Southern Africa’s food security. Its widespread production across this region is somewhat of a barometer of the status of the agricultural output. The past 2023-24 maize production season was challenging following a mid-summer drought that led to poor harvest across the region. Zambia lost half of its maize crop, Zimbabwe lost nearly two-thirds of its maize, and other countries such as Malawi and Lesotho experienced significant losses.
South Africa was a slight exception because the impact was less severe than the region. The country’s maize harvest fell by 23% to 12,7 million tonnes. The differences in seed cultivars and fertilizer usage partly explain the mild crop losses compared with the wider Southern Africa region. The harvest of 12,70 million tonnes is slightly above South Africa’s annual maize consumption of 11,80 million tonnes.
The 2023-24 season’s maize harvest and large carryover stock from the last season have made South Africa comfortable with maize supplies. Thus, the country remains a net exporter of maize even in such a challenging season.
Considering the near-term export activity, South Africa exported 42k tonnes of maize last week (November 8). Of this volume, 64% was exported to Zimbabwe, 15% to Namibia, 12% to Botswana, and the balance to the neighbouring African countries.
These exports put South Africa’s total maize exports in the 2024-25 marketing year at 1,20 million tonnes out of the expected 1,90 million tonnes (down from 3,44 million tonnes in the 2023-24 marketing year because of the mid-summer drought).
Moreover, while South Africa will likely remain the net exporter of maize in the 2024-25 marketing year, the coastal regions will import small volumes of yellow maize for animal feed because of price advantage. We have recently seen the imports of yellow maize from Argentina through Cape Town. South Africa’s 2024-25 maize imports currently stand at 288k tonnes.
With all this export activity underway, I must stress that South Africa’s white maize supplies are tight. Thus, the prices have surged in recent months, and more so over the past few days.
Still, it is worth emphasizing that the price surge is likely a near-term challenge. The outlook for the new 2024-25 production season is positive and may offer relief. We are leaning on the expected La Nina rains in this optimistic view. We have started receiving nice showers in some regions of the country, allowing farmers to begin planting.
The early planting of maize has primarily been in the eastern regions of South Africa. We hope more rain improves soil moisture in the coming weeks and months. In the coming weeks, the maize planting activity will also gain momentum in the western regions of South Africa.
South African farmers are also optimistic about the 2024-25 maize production season. The farmers intend to plant white maize on 1,58 million hectares (up 1% y/y) and yellow maize on 1,06 million hectares (down 2% y/y). The overall maize planting intentions are at 2,64 million hectares (up 0,2% y/y), which aligns with the five-year average area.
The favourable weather outlook, higher commodity prices, and lower fertilizer and agrochemical prices have incentivized farmers to increase their maize plantings. It will be some time before we have a good feel of the area farmers will ultimately plant. Still, these intentions to plant data provide sufficient reason to be optimistic about the path ahead.
While we are unsure of the actual intentions in the broader Southern Africa region, we suspect that the farmers are probably also eager to plant for the new season.
In some poor areas, the farmers may struggle with inputs such as seeds and fertilizers. In such places, the local government and multinationals such as the World Food Programme should consider supporting farmers to bounce back from the harsh season of 2023-24.
A recovery in Southern Africa’s maize production will be valuable for regional food security improvement.
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by Wandile Sihlobo | Nov 5, 2024 | Food Security
South Africa holds a relatively strong position in global food security, ranking first in sub–Saharan Africa and only behind Morocco in the rest of the continent. But those numbers mask the fact that many millions of South Africans still go hungry.
That’s because there are two ways of gauging food security. Firstly, at a national scale, which is when a country produces or imports enough to meet overall demand. Then, there is household food security, when there is enough access to safe and nutritious food in a home.
One of the measures researchers often use to evaluate food security is The Economist’s Global Food Security Index (GFSI). The country improved its ranking in 2022, climbing from 70th to 59th out of 113 countries.
The major issue to remember when looking at indices like these is that subjectivity can never be fully eliminated. Bias can stem from inconsistency in data quality, frequency and reliability across all countries. Weightings and rankings are also tricky because they must be tailored to suit different socio-economic contexts.
In contrast, a survey conducted by the Human Sciences Research Council between 2021 and 2023 found that 17.5% of households experience severe food insecurity. This means that they cut back on meal sizes, reduce the number of meals, run out of food, or even go an entire day without eating. Another 26.7% of households were classified as moderately food insecure, often consuming poor-quality food and sometimes having to limit their portion sizes or meal frequency.
With that out of the way, let’s look into the GFSI. The index is broken down into four components: affordability, availability, quality and safety, and sustainability. Affordability and availability account for two-thirds of the index, making them critical indicators of food security.
In 2022, South Africa saw an improvement in several of these categories, but food affordability deteriorated. The reason? Soaring food inflation, which averaged 9.5% in 2022 and climbed to 11% in 2023 before decelerating to 4.8% in 2024.
In recent years, food prices have been driven up globally by a combination of factors, so the challenge was not unique to South Africa.
These include poor harvests in major producing nations like Brazil and Argentina, China’s surging grain demand following its recovery from a major devastating African Swine Fever epidemic, and the ongoing Russia-Ukraine war, which has disrupted vital grain and oilseed supplies.
These pressures have been felt acutely in South Africa, where high unemployment amplifies the effect of rising food costs on consumers.
Thankfully, in 2022 and 2023, South Africa was in a reasonably better place, with abundant supplies, as the La Niña weather event brought good rains across the country and supported agriculture. Even so, prices rose to reflect what was happening internationally.
Fortunately, by the end of 2022, there was a deal that allowed for exports of grain from Ukraine without military attacks by Russia. This helped global agricultural prices fall from their previous record levels. International prices continued to decline after that, which meant that even domestically, food price inflation moderated in 2024.
Quite what happens next year, however, remains in considerable doubt thanks to a new drought expected here at home this summer.
Nonetheless, South Africa is undoubtedly in a better place when it comes to national food security than many other countries.
No time to sit back
But this does not mean the country can afford to be complacent: it must continue to improve food security by expanding its agricultural production and job creation in various sectors of the economy.
At a technical level, the idea of expanding agriculture and agro-processing capacity to boost economic growth and job creation is well established. It was detailed in the 2012 National Development Plan and highlighted again in the 2022 Agriculture and Agro-processing Master Plan, a fact I underscored in my new book.
These include expanding agricultural activity in the former homelands and government land and the release of land along with title deeds to the beneficiaries bought by the government under its Proactive Land Acquisition Strategy (2.5-million hectares are in the government’s books already).
Other steps must incorporate the implementation of an effective blended finance scheme, while the government must increase its investment in water, electricity, road and port infrastructure, and laboratories.
There is plenty of scope for improvement. Limpopo, KwaZulu-Natal and the Eastern Cape are the most food-insecure provinces, but they also have vast tracts of underutilised land.
These provinces should be the priority for agricultural development plans, with a strong commercial focus where conditions permit. Once that happens, South Africa’s food security will be that much stronger.
NOTE: I wrote this piece for CurrencyNews, and it first appeared on their website.
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by Wandile Sihlobo | Oct 26, 2024 | Food Security
After a slight increase to 4,1% in August 2024, South Africa’s consumer food price inflation remained unchanged in September.
However, there was a mild deceleration in some products’ price inflation, including “bread and cereals”, “meat”, “sugar, sweets and desserts”. The “oils and fats” are in deflation. The “milk, eggs and cheese” remained flat from the previous month.
These moderating price trends were countered by the slight increase in the price inflation of “fish”, “fruit”, and “vegetables”; thus leading to an unchanged headline consumer food price inflation in September 2024.
The base effects of higher consumer food price inflation a year ago have contributed to the generally moderate trend of some products this year. For example, this time last year, there were risks of higher grain prices after India banned rice exports, and avian influenza, which spread in various regions of the country, led to constraints on egg supplies and, ultimately, upside price risks.
We are far from that worrying reality, as India has resumed rice exports and South Africa’s poultry product supplies have normalized.
While having eased in September 2024, the 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 12,80 million tonnes, down 22% 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, while yellow maize prices have remained sideways. 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.
The increase in the prices of vegetable products will likely be temporary and mirror the disruptions due to weather-related issues. We have already seen the volume of various vegetable products improving in some fresh produce markets.
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by Wandile Sihlobo | Oct 12, 2024 | Food Security
Earlier this week, I stated on X (Twitter) that South Africa is generally food secure at a “national level” but has a major “household food insecurity” challenge. Given the difficulty many South Africans face, I should have offered more detail on what I meant. The idea was not to disregard the painful challenge of hunger we all witness daily across the country.
Hence, I want to explain my thought process at length in this post and offer some suggestions about improving our situation at the end of this piece.
One of the measures some researchers often use to evaluate the food security condition of each country relative to the world is The Economist’s Global Food Security Index. In 2022, South Africa ranked 59th out of 113 countries in the index and was the most food secure in Sub-Saharan Africa. This is an improvement from the previous year’s ranking of 70th in 2021. South Africa ranked the second most food-secure country in the African continent after Morocco.
The Global Food Security Index comprises four subindices, namely: (1) food affordability, (2) food availability, (3) food quality and safety, and (4) sustainability and adaptation. The affordability and availability subindices carry a combined weighting of two-thirds of the total index. The affordability subindex includes the change in average food costs, agricultural trade, food safety net programs, proportion of population under the global poverty line, and funding for food safety net programs.
Meanwhile, the availability subindex includes the sufficiency of supply, access to inputs, agricultural research and development, farm infrastructure, supply chain infrastructure, food loss, and political and social barriers to food.
In 2022, South Africa experienced a mild deterioration in the food affordability subindex of 7 points. Meanwhile, the rest of the other subindices improved significantly. This decline in the affordability subindex is unsurprising as the country witnessed a broad acceleration in consumer food price inflation since the start of the year. South Africa’s consumer food price inflation averaged 9,5% y/y in 2022, from 6,5% up from in 2021. Food inflation was also elevated in 2023, averaging at 11,0%.
In 2024, however, we saw market deceleration, with South Africa’s food inflation averaging 4,8% in the first eight months of the year.
Global challenges that pushed up food prices
Importantly, the higher food inflation in 2022 and 2023 was a global challenge not unique to South Africa.
Admittedly, in an environment such as South Africa with higher unemployment, the effects of food inflation shocks tend to be more severely felt by consumers.
Over the last few years, several factors have added upward pressure on global food prices. First, the drought in South America in the 2019/20 season reduced the harvest notably, primarily in Brazil and Argentina. These countries collectively account for 14% and 50% of global maize and soybean production. The drought persisted for roughly three seasons since 2019/20, further exacerbating the grain price increases from 2020 to 2022.
Secondly, China’s imports of grains and oilseed as the country was rebuilding its pork industry after a devastating African Swine Fever also added to the surge in demand at a period when global stocks were tight. China’s growing demand had a consequential impact on global grain prices because of its share size of imports. The country imports about 60% of globally traded soybeans.
As COVID-19 spread in early 2020, several major grain producers, such as India, Kazakhstan and Vietnam, worsened global price increases by temporarily banning exports. As this unfolded, shipping costs soared, increasing global grain prices further. In sum, a combination of trade policy actions by other countries, logistics and weather conditions placed upward pressure on food prices.
These challenges were further worsened by the Russia-Ukraine war. Russia and Ukraine are substantial players in the grains and oilseeds market. The former produces about 10% of global wheat, while Ukraine accounts for 4%. Together, the two countries account for a quarter of global wheat exports.
Moreover, Russia and Ukraine are notable players in maize, responsible for 4% of production combined. However, their contribution is even more significant in exports, accounting for an average of 14%. Both countries are also among the leading producers and exporters of sunflower oil. Pre-war, Ukraine’s global product exports accounted for 40%, with Russia accounting for 18%. Thus, the war led to a surge in grains and oilseeds prices for much of 2022.
South Africa problems
As a small, open economy, South Africa, interlinked with the world, was not insulated from these agricultural and food price shocks. Admittedly, in 2022 and 2023, South Africa was in a reasonably better place, with abundant supplies, as the La Niña weather event brought good rains across the country and supported agricultural activity. Still, the prices did not reflect the increased domestic supplies as the global shocks dominated.
These were the first round of shocks in global food prices. Fortunately, by the end of 2022, as the grain trade resumed in the Black Sea region following the Black Sea Grain Deal initiative that started in July 2022 and allowed for exports of grain from Ukraine without military attacks by Russia, the global agricultural prices came off the record levels seen months after the invasion of Ukraine. The global agricultural prices continued to decline throughout 2023 and 2024. Thus, even domestically, the food price inflation moderated somewhat in 2024 (The new upside risk on prices in South Africa is the domestic drought in the 2024 summer season).
The problem with the food security measurements
The major issue to keep in mind when observing global agricultural indices, such as the Global Food Security Index, is that subjectivity can never be fully eliminated from the authors’ judgment. Resource constraints can hinder objective data collection on the ground in each country, and they sometimes rely on blueprint models that may not be site-specific.
Sources of bias can stem from inconsistency in data quality, frequency and reliability across all countries. The weightings and rankings are also tricky because they must be tailored to suit different socio-economic contexts.
Key message
With that said, the key message is that South Africa is in a better place regarding food security when compared with various countries in the world. This does not mean there should be complacency. South Africa will need to continue improving food security through expansion in agricultural production and job creation in various sectors of the economy.
At a technical level, the ideas of expanding agriculture and agro-processing capacity to boost growth and job creation were well established as far back as in the National Development Plan 2012. They were again highlighted in the 2019 National Treasury paper, in the 2022 Agriculture and Agro-processing Master Plan, and, most recently, in a book titled A Country of Two Agricultures: The Disparities, The Challenges, The Solutions.
These include expanding agricultural activity in the former homelands and government land, the release of PLAS land with title deeds (about 2,5 million hectares that are in government books), effective blended finance scheme, enhancing government-commodity organizations’ partnerships in extension services, investment in the network industries (water, electricity and road infrastructure), port infrastructure, and state laboratories.
Across the regions, Limpopo, KwaZulu-Natal and the Eastern Cape are the most food-insecure provinces, but these provinces also have vast tracts of underutilized land.
These provinces should be a priority in agricultural development plans, with a commercial focus where conditions permit job creation to be achieved, all to boost South Africa’s food security conditions.
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