by Wandile Sihlobo | Jun 27, 2022 | Food Security
We are in a period of elevated prices, and food is at the core of these increases. For example, in May 2022, South Africa’s consumer food price inflation accelerated to 7,8% y/y, from 6,3% in the previous month. This is the quickest pace since March 2017.
The increase was broad base on all food products in the inflation basket. This largely mirrors the uptick we have been seeing in the global agricultural commodity prices, and indeed the domestic market.
Importantly, we are now also starting to see the spillover the Russia-Ukraine war had on agricultural commodity prices transmitted into retail food prices. In fact, for the grain-related and vegetable oils products, we will likely see a continuous mild uptick in the coming month or two, which could push up mildly the headline food consumer price inflation number further.
Since the Russia-Ukraine war began and disrupted the global grains market, the global agricultural commodity prices have increased significantly, with the FAO’s Global Food Price Index in May averaging 157 points, which is up 22% y/y, coming from a record high seen in March.
The disruption in the palm oil market, and indeed the entire vegetable oils market, the ban on wheat exports by India, and the expected lower wheat harvest in the 2022/23 production season are added upside risks that could sustain global food prices at higher levels.
We, however, don’t see potential further increases in the global agricultural commodity prices, but that prices could hover at current elevated levels for some time. South Africa, which is interlined to global agricultural markets, has also experienced increased agricultural commodity prices.
The result of these developments is the recent uptick in the cereals, and oil and fat products prices in the consumer food price inflation basket. These could remain elevated, in line with our expectations of global agricultural commodity prices.
Nevertheless, we still think the outlook on food product prices will remain mixed, despite the recent broad increase in product prices.
In the case of fruits and vegetables, South Africa has a sizable harvest and the disruption in fruit exports within the Black Sea region could add downward pressure on domestic prices. Therefore, we hold a generally favourable view of these product price directions for the coming months. Moreover, the recent increases in the vegetable price inflation were reflective of a temporary supply disruption, which is now adjusting well.
The one essential product whose price trend remains uncertain is meat. The recent outbreaks of foot-and-mouth disease have led to the temporary closure of some key export markets for the red meat industry, thus potentially adding downward pressure on prices.
Still, this will be dependent on the cattle and sheep slaughtering activity, which for now remains robust, with 197 712 head of cattle slaughtered in April 2022 (-2% y/y), and 318 155 head of sheep slaughtered in the same month (-10% y/y). Conversely, there are fears of a potential increase in poultry product prices, which could lessen the benefit of softer red meat prices.
Overall, various factors in the food market will likely push in opposing directions in the coming months. Thus, I believe that South Africa’s consumer food price inflation could average just above 6,0% y/y in 2022 (from 6,5% in 2021).
The base effects, along with meat, fruits and vegetables, will likely provide a constructive price inflation path ahead. With that said, the next month or two will likely show elevated consumer food price inflation, with moderation in much of the second half of the year.
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by Wandile Sihlobo | May 26, 2022 | Food Security
When the Russia-Ukraine war started, we all worried about its impact on global agriculture and South African consumers. I wrote an article assessing how South African agriculture and consumers will feel the war in Ukraine for Econ3x3, published here.
This week, headlines in global publications such as The Economist, The Washington Post, and the Financial Times focused on the rising global food insecurity crisis.
This prompted the Econ3x3 editor, Pippa Green, to ask that I provide an updated view on the subject for South Africa.
The essay is now published, and you can read it by clicking here — Reflections on South Africa’s food security: the effects of the Russia-Ukraine war.
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by Wandile Sihlobo | May 21, 2022 | Food Security
The data released by Statistics South Africa this past week showed that the country’s consumer food price inflation decelerated to 6,3% y/y in April 2022 from 6,6% y/y in the previous month. This is on the back of relatively softer price increases in meat; milk, eggs and cheese; and vegetables.
These data are roughly within our expectations, and the food products price variation will likely persist in the coming months. In other words, fruit; vegetables; milk, eggs and cheese; and to a lesser extent, meat, could see softer price increases in the coming months.
SA consumer food price inflation slightly decelerates in April 2022
Meanwhile, grain-related products and oils and fats could register notable price increases. This will mirror the price movements we are currently observing in the agricultural markets.
For example, since the war in Ukraine began and disrupted the global grains market, the agricultural commodity prices have increased significantly, with the FAO’s Global Food Price Index in April averaging 158 points, which is up 30% y/y, coming from a record high seen in March. But the recent ban on palm oil exports by Indonesia, the ban on wheat exports by India, and the expected lower wheat harvest in the 2022/23 production season has since added renewed upside pressures to agricultural commodity prices. These will likely reflect on the FAO’s Global Food Price Index update to be released on 03 June 2022.
Global agricultural commodity prices could remain elevated for some time
As interlinked to the global agricultural markets, South Africa has also experienced increased agricultural commodity prices. The resulting observation of these developments is a potential uptick in the cereals, and oil and fat products prices in the consumer food price inflation basket. The additional upside risk to the domestic market is also the rise in fuel prices.
In the case of fruits and vegetables, South Africa has a sizable harvest and the disruption in fruit exports within the Black Sea region could also add downward pressure on domestic prices; hence we hold a generally favourable view of these product price directions for the coming months.
The one essential product whose price trend remains uncertain is meat. The recent outbreaks of foot-and-mouth disease have led to the temporary closure of some key export markets for the red meat industry, thus adding downward pressure on prices. Conversely, there are fears of a potential increase in poultry product prices, which could lessen the benefit of softer red meat prices.
Overall, various factors in the food market all push in opposing directions in the short term. With that said, we believe that South Africa’s consumer food price inflation could average 6,0% y/y in 2022 (from 6,5% in 2021). The base effects, along with meat, fruits and vegetables, will likely provide a constructive price inflation path ahead.
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by Wandile Sihlobo | Apr 22, 2022 | Food Security
Since the war in Ukraine began and disrupted the global grains market, the agricultural commodity prices have increased significantly, with the FAO’s Global Food Price Index in March averaging 170 points, which is the highest level since the inception of the Index in 1990. The rise in grains and vegetable oil prices has been the primary driver of the surge in the Index.
Being interlinked to the global agricultural markets, South Africa has also experienced increases in agricultural commodity prices. The resulting observation of these developments has been a potential uptick in consumer food price inflation. But there is a lag between farmgate price increases and price increases at the retail level.
Hence, the recently released data by Statistics South Africa showed that the country’s consumer food price inflation moderated to 6,6% y/y in March 2022 from 6,7% y/y in the previous month. This is on the back of softer price increases in fish; milk, eggs and cheese; oils and fats; and vegetables. The moderation in the “oils and fats” products prices is temporary. The global vegetable oils prices continue to surge, and local prices will follow a similar trend with time. Moreover, the higher grains prices will also reflect on the elevated “bread and cereals.”
However, even though the Russia-Ukraine war is affecting the global grains trade and domestically, we have recently had the floods in KwaZulu-Natal, we don’t foresee risks to food products supply over the foreseeable future, but only potential price increases. There is a sizeable domestic harvest of grains, fruits, and expected import volumes for products that the country typically imports, such as rice, wheat, and palm oil.
The one essential product whose price trend remains uncertain is meat. The recent outbreak of foot-and-mouth disease will likely lead to the temporary closure of some key export markets for the red meat industry, thus adding downward pressure on prices. Conversely, there are fears of a potential increase in poultry product prices, which could somewhat offset the benefit of softer red meat prices.
There are various factors all pushing in opposing directions in the short term. As a result of these dynamics, we now expect South Africa’s consumer food price inflation to increase modestly from readings in recent months, and possibly average 6,0% y/y in 2022 (from 6,5% in 2021), and not follow the drastic surge that we have observed in grains prices. The base effects and meat and fruit will also play a constructive role in the trajectory of consumer food price inflation.
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by Wandile Sihlobo | Mar 30, 2022 | Food Security
The subject of food prices is again a major focus as the agricultural commodities prices continue to surge on the back of the Russia-Ukraine war.
But the effects of the war on agricultural commodities prices have not yet been fully reflected in the retail prices of various food products due to the lag in price transmission. The price increases will likely reflect, partially, from March 2022 consumer food price inflation and the months that follow.
So far, we have South Africa’s consumer food price inflation data for February 2022, which accelerated to 6,7% y/y, from 6,2% y/y in the previous month. Bread and cereals; meat and fish, are the primary products that underpinned this mild uptick in overall consumer food price inflation in February.
What is worth emphasizing is that global grains prices have primarily underpinned the increases in domestic agricultural commodity prices over the past two years. The size of the domestic grains harvest mattered less than the crop conditions in South America or oilseeds and grains demand in China and India, which were primary drivers of the global market. These factors provided upward pressure on global grains and oilseeds prices.
South Africa, a relatively small player in global agriculture, is linked to the global market and is therefore generally a price taker for various commodities. Thus, the general rise in global prices overshadowed the improved domestic crop supply in the 2020/21 production season. These conditions remain the dominant feature in the global agricultural market. For intense, the FAO Cereal Price Index averaged 144.8 points in February, up by 3% from January and 15% one year ago.
With the Russia-Ukraine war having affected the grains and vegetable oil markets the most because of the significance of these two countries in global exports of the commodities, the prices have surged since the invasion on 24 February 2022. Thus, we expect the “bread and cereals” and “oils and fats” to be the main channels through which these global factors drive South Africa’s consumer food price inflation higher in the months to come.
There are no risks of supply shortages per se of grains or vegetable oils in South Africa over the foreseeable future, only a potential price increase. For example, while the 2021/22 first production estimate for maize is 14,5 million tonnes, down 11% year-on-year (y/y), this is well above the 10-year average harvest of 12,8 million tonnes and annual maize consumption of 11,5 million tonnes. About 7,5 million tonnes is white maize, and 7.0 million tonnes is yellow maize. The yearly decline is mainly due to a reduction in area plantings and expected lower yields in some regions, due to excessive rains. Notably, South Africa will likely remain a net exporter of maize in the 2022/23 marketing year, which starts in May.
Moreover, South Africa’s 2021/22 sunflower seed production is forecast at 914 350 tonnes, up by 35% y/y. This is the third-largest harvest on record, primarily due to an expansion in area plantings and expected better yields in some regions. This increase in sunflower seed production will help boost domestic supplies and lessen the reliance on imports.
In terms of wheat, a large share of the expected imports has already been imported, and the importers are confident that they will be able to secure the required supplies for domestic consumption for the rest of the year. We also expect a potential increase in domestic wheat consumption in the 2022/23 season.
Still, not all food prices will necessarily be rising in the short term. There could be downward price pressures on fruits in the coming months due to an increase in supply in the harvest period of citrus and the temporary limits of key exports in the Black Sea region.
The recent outbreak of foot-and-mouth disease will likely lead to the temporary closure of some key export markets for the red meat industry, thus adding downward pressure on prices.
Clearly, there is a variety of factors all pushing in opposing directions in the short term. As a result of these dynamics, we now expect South Africa’s consumer food price inflation to increase modestly from readings in recent months, and possibly average 6,0% y/y in 2022 (from 6,5% in 2021), and not follow the drastic surge that we have observed in grains prices. The base effects and the meat and fruit dynamics we mentioned above will also play a constructive role in the consumer food price inflation path.
A crucial major upside risk to consumer food price inflation worth monitoring is fuel, whose prices continue to increase on the back of higher Brent crude oil prices. For instance, the price of diesel increased by 44% over the course of 2021 and by a further 9% since the start of the year. On average, 75% of national grains and oilseeds are transported by road and a substantial share of other agricultural products.
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by Wandile Sihlobo | Jan 17, 2022 | Food Security
“Bathi isitshixo semvula sikuwe, vala le mvula, sonele ngoku!” (They say you have the key for closing the rain tank; we’ve had enough, close it now), said Victor Mongoato, a grain farmer from Matatiele, on a call with me earlier this week.
Of course, Mongoato didn’t mean I literally had a key to stop the rain; instead, he was expressing his frustrations with the excessive rains, and the havoc they have caused on his farm and many others around the country. I spoke to several other farmers in different parts of the country, including Free State and North West regions. They were as exasperated as Mongoato as they watched helplessly the rain damaging their crops. This has caused severe delays in planting activity in some areas. It may sound paradoxical to say that rain has been destructive. Farmers need rain but in reasonable quantities; and that’s not what we’ve been seeing in the last two to three months.
A recent survey done by Grain South Africa shows that farmers in the Free State, Mpumalanga, North West, Limpopo, and KwaZulu-Natal ranked excessive rains as their biggest risk to crops this year. This was compared to other risks such as frost, crop diseases, weed and hail damage. Such results would be unthinkable just a few years ago when the major climate-related risk for most areas of South Africa was usually drought.
We are in an unusual period. South Africa has not had three consecutive seasons of above-average rainfall in a long time. The current 2021-22 rainy season follows 2020-21 and 2019-20, which had above-normal rainfall, which was, fortunately, still moderate in terms of intensity, and supported the agricultural activity. For this reason, I hailed 2021 as one of the best agricultural seasons in a long time.
Considering the maize industry, the seasons of 2019-20 and 2020-21 were the first time in history where South Africa’s maize yields have surpassed 15-million tonnes in two successive seasons — 15.3 million tonnes in 2019-20 and 16.2-million tonnes in the 2020-21 season.
The typical cycles of above-normal rains in South Africa are two seasons, normally giving us a large agricultural output. These favourable spells tend to be followed by dryness, and thereafter, a notable decline in crop output.
The only periods in the recent memory that had three successive years of conducive weather conditions and a large crop harvest were in the 2007-08, 2008-09, and 2009-10 production seasons. During this period, commercial maize production was more than 12-million tonnes each year, averaging 12.5-million tonnes a year. Other crops such as soybeans and sunflower seed also had relatively large output during this period. The grazing veld for livestock also improved.
At the start of the current season, there was generally no concern about the possibility of excessive rain. From September 2021 going into December, I thought we were on a solid path of three consecutive favourable agricultural seasons. The optimism of the start of the season wasn’t just shared by me, rather by farmers themselves. In the intentions to plant data released by the Crop Estimates Committee at the end of October 2021, farmers noted that they planned to lift the area planted to summer crops by 3% in 2021-22 production season, compared to the previous one, to 4.3 million hectares. This comprises maize, sunflower seed, soybeans, groundnuts (peanuts), sorghum and dry beans.
It was in mid-December that I realized that we have an unusual challenge as I drove across the countryside. We know now from observations and surveys that the actual plantings are probably less than this area. Notably, the yields will be negatively affected in several provinces, as the Grain South Africa producer survey also signalled (the survey was not a nationwide representative; still, it provides valuable insights about crop conditions).
We will learn more about the actual size of the land that farmers probably planted in the afternoon of 27 January, which is the date that the Crop Estimates Committee will release its preliminary area planting data for South Africa’s summer crops. This will be important information to help us estimate what the final crop size will possibly be in the 2021-22 season.
Consumer food price inflation
There are understandably worries and questions about what these rains mean for South Africa’s food price inflation for the year. But one has to appreciate that the domestic heavy rains challenges come on the backdrop of already elevated agricultural commodity prices, and thereafter food price inflation.
For example, the data we have for the first eleven months of 2021 shows that South Africa’s consumer food price inflation averaged 6.5% (compared with 4.6% y/y in 2020). The products in the food inflation category such as “bread and cereals”, “meat”, “oils and fats”, and “vegetables” have primarily underpinned the uptick in headline consumer food price inflation.
As I noted earlier, all this transpired when we had one of the best agricultural seasons in years. The price drivers were not domestic events but global developments. The large crop harvests in South Africa contributed less towards price determination here at home than the rising crop demand in Asia or a poor harvest in South America.
Briefly, the drivers of prices were production constraints in South America, combined with rising demand for oilseeds and grains in China and India. South America had a poor crop harvest in 2021, primarily for maize, because of the La Niña weather phenomenon that typically leads to below-average rainfall in the Northern Hemisphere. The combination of these factors provided upward pressure on global grain and oilseed prices. South Africa, a relatively small player in global agriculture, is linked to the global market. Thus, the general rise in global prices overshadowed the improved domestic crop supply.
I am mentioning these price drivers because they have not subsided. The Financial Times article of 8 January 2022, headline: “Food prices remain high into 2022 on shortages due to extreme weather”. South America continues to experience adverse weather conditions and downward harvest prospects, while the demand for grains in China and India remains relatively firm.
Therefore, the possible decline in crop harvest in South Africa will not be the only driver of food prices in 2022. Much of what consumers will be paying for food will also result from these global events that we have no control over. Importantly, there is also no telling at the moment how much the summer crop harvest will be and whether it will decline to the extent that South Africa will have to import some supplies. This is one of the questions that will be clearer with time.
I think we will have a poorer harvest than the glowing 2020-21 harvest, but I doubt that we will be at a point where we have to import supplies, other than the grains that we typically import such as wheat. Again, this is purely my judgement based on minimal anecdotal evidence. It is for this reason that 27 January is so critical. Even more critical will be 28 February where the Crop Estimates Committee will publish the first production estimates.
Accounting for the base effects, it is still possible that food price inflation could be somewhat moderate this year compared to 2021. But one can formulate a better view here once there is clarity about the potential crop size for the year.
Before these excessive rains story, my initial worry on the food price inflation basket was; meat, which decelerated somewhat in November, along with oils and fats. I thought these particular products prices had a potential upside risk. The data I was looking at from the Red Meat Levy showed that South Africa’s cattle slaughtering activity was at relatively lower levels for much of 2021 compared to 2020. Moreover, South Africa is a net importer of vegetable oils and fats, and these product prices have remained elevated in the global market.
Clearly, for the earlier months of this year, food prices and possible damage in some farming communities will remain topical, and the latter could need government assistance. Still, we will monitor the developments and formulate views on price direction as more credible data becomes available.
This essay was first published in the Mail and Guardian.
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by Wandile Sihlobo | Dec 21, 2021 | Food Security
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.
But to fully appreciate these the causes of the increase in prices, one has to recognize that this is not unique to South Africa but a global occurrence. The large crop harvests in South Africa contributed less towards price determination here at home than events in South America and Asia.
The drivers of pieces were production constraints in South America, combined with rising demand for oilseeds and grains in China and India. South America had a poor crop harvest in 2021, primarily for maize, because of the La Niña weather phenomenon that typically leads to below-average rainfall in the Northern Hemisphere. (For clarity, in Southern Africa, La Niña weather event leads to above-average rain and is generally favourable for agriculture).
These poor crop harvests in South America, combined with the rising demand in China and India, provided upward pressure on global grain and oilseed prices. The lingering shipping container shortage and the associated rise in shipping costs also added upward pressure on food prices for much of the year.
South Africa, a relatively small player in global agriculture, is linked to the global market. Thus, the general rise in global prices overshadowed the improved domestic crop supply.
The influence of the global price increases saw South Africa’s consumer food price inflation reaching 7.4% year-on-year (y/y) in August 2021, which was the highest level since March 2017. The products in the food inflation category such as “bread and cereals”, “meat”, “oils and fats”, and “vegetables” have primarily underpinned the uptick in headline consumer food price inflation.
But there is a change in the path. The latest inflation data shows some moderation in South Africa’s consumer food price inflation. After peaking to 7.4% y/y in August 2021, as previously stated, South Africa’s consumer food price inflation has continued to moderate and softened to 6.0% in November from 6.7% in October.
The food products prices underpinning this deceleration in inflation are “bread and cereals”, “meat”, “fruit”, and “vegetables”. These are some of the products whose prices have been rising this year for a while. Thus, for the first eleven months of 2021, South Africa’s consumer food price inflation averaged 6.5% (compared with 4.6% y/y in 2020).
The critical question on people’s minds is whether the slowing trend in consumer food price inflation will slow?
Globally, key players such as Dave MacLennan, the Chief Executive Officer of Cargill Inc., expects global food prices to soften in the coming months. If this were to materialize, it would be positive for the South African consumer as the general rise in prices domestically, were from the start, primarily a product of global developments than what happens in the South African farms and food processing plants.
Putting MacLennan’s expectations aside for a minute, while I expect South Africa’s consumer food price inflation to continue to slow into 2022, I no longer think this will be significant. Meat, which decelerated somewhat in November, along with oils and fats, will likely remain at relatively higher levels for some time, thus countering the potential decline in various products such as “bread and cereals”, “fruit”, and “vegetables”.
The reason I say this is because South Africa’s cattle slaughtering activity remain at relatively lower levels compared to 2020, and this could provide mild upward pressures for meat price inflation in the near term. According to data from the Red Meat Levy, in October 2021, cattle slaughtering activity was down by 2% y/y, with 210 971 heads slaughtered. Notably, the slaughtering has been subdued for in the past few months.
The livestock industry is still in the herd-rebuilding process that started during the drought of 2015-16. Moreover, the excellent performance in crops production in the 2020/21 season may have helped provide some financial breathing room for some diversified farmers to rebuild herds rather than sell more meat to the domestic market. The potential uptick in meat demand during the festive season might also add to the upward price pressures in meat.
In addition, South Africa is a net importer of vegetable oils and fats, and these product prices have remained elevated in the global market.
Other upside risks to consumer food price inflation include the dryness in South America because of another cycle of La Niña, which could again undermine crop yield. Moreover, the persistently rising demand for agricultural products in Asia could present upward pressure on prices. These are significant risks that would go against MacLennan’s expectations.
As I recently pointed in an essay co-authored with fellow agricultural economists Tracy Davids, Marlene Louw, and Melissa Van Der Merwe, one should look to 2022 with a sense of caution that consumer food prices could remain elevated. While the pace of price increases might soften, households could remain under pressure for a while as the world, and local supply chains adjust.
In sum, the subject of food prices will likely remain topical in 2022, primarily because of the upside risks I have mentioned above.
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by Wandile Sihlobo | Nov 28, 2021 | Food Security
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).
But the large crop harvests in South Africa contributed less towards price determination in global food prices compared to production constraints in South America, combined with rising demand for oilseeds and grains in China. South America has poor crop harvests, especially for maize, because of the La Niña weather phenomenon that typically leads to below-average rainfall (In Southern Africa, La Niña leads to above-average rainfall). These poor harvests, combined with the rising demand in China, provided upward pressure on global grain and oilseed prices. The lingering shipping container shortage and the associated rise in shipping costs for much of the year also supported prices.
South Africa, a relatively small player in global agriculture, is linked to the global market. Thus, the general rise in global prices overshadowed the improved domestic supply. The domestic consumer food price inflation peaked in August 2021, reaching 7,4% y/y, the highest level since March 2017. Fortunately, subsequent months show moderation, with food price inflation slowing to 6,7% y/y in October 2021. There was a deceleration in product price inflation across the food basket, except for vegetables. Still, I think the uptick in vegetable price inflation is temporary and was mainly caused by the supply constraints in the northern parts of South Africa in the past few months, which has now normalised.
Although at the Agricultural Business Chamber of South Africa (Agbiz) we still expect consumer food price inflation to continue to slow down in the coming months, we have since trimmed our forecast. This is because meat, vegetable oils and fats, which decelerated somewhat in October, will likely remain at fairly higher price levels for some time, thus countering the potential decline in various products such as ‘bread and cereals’ and ‘vegetables.’
To support this, the cattle and sheep slaughtering activity remains at relatively lower levels compared to 2020, and this could provide mild support for meat price inflation in the near term. In August 2021, cattle and sheep slaughtering activity was down by 1% y/y and 3% /y/y, with 207 449 and 293 883 head slaughtered, respectively. The livestock industry is still in the herd-rebuilding process since the drought of 2015-16. Moreover, the continuous outbreak of foot-and-mouth disease in some provinces of South Africa, such as KwaZulu-Natal and Limpopo, has recently led to farmers slowing their slaughtering activity.
This is slightly different from what we have observed in the past when such outbreaks and concomitant temporary export bans would typically result in somewhat increased meat supply and, consequently, softened prices. The excellent performance in crop production may have helped to provide some financial breathing room for some diversified farmers to rebuild herds rather than sell more meat to the domestic market to stay afloat.
In addition, South Africa is a net importer of vegetable oils and fats, and these products’ prices have remained elevated in the global market. For example, the Food and Agriculture Organization of the United Nations (FAO) ‘s Vegetable Oil Price Index averaged 185 points in October 2021, up by 10% month-on-month to an all-time high. This is underpinned by higher palm oil, soybeans, sunflower seed and canola prices on the back of constrained supplies in key producing countries such as Malaysia, Canada and parts of Europe, and the generally strong demand from China and India. This is similar to what I explained earlier about the global food products’ impact on domestic food prices.
In essence, food prices are now increasing at a softer pace, and will likely continue moderating. But the headroom for this moderation will be limited despite the favourable domestic agricultural production outlook. The relatively higher food prices are not caused by domestic farmers and food processors, nor are they unique to South Africa; this is a global phenomenon.
We expect a slight moderation in South Africa’s consumer food price inflation going into 2022. However, the major upside risks to global food prices, such as dryness in South America and rising demand for agricultural products in Asia, persist. We are already in a La Niña period, as evidenced by fairly above-average rainfall in much of South Africa in recent weeks. The question remains as to how La Niña, which typically brings below-average rainfall to South America, will affect the 2021/22 global crop production and prices. We will watch global meteorological developments closely, as they will influence what we pay for our food basket in 2022 and possibly beyond.
This essay first appeared in The Herald, 24 November 2021
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