http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.14Change: -0.22
R/$ = 11.72Change: -0.18
Au 1216.89 $/ozChange: -0.61
Pt 1188.50 $/ozChange: -2.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Jan 28, 2011

The impact of higher food prices on South Africa’s inflation remains highly uncertain

Back
Agriculture|Africa|Africa|Products
Agriculture|Africa|Africa|Products
agriculture|africa-company|africa|products
© Reuse this



The food price index rose to 215 points in December 2010, statistics released by the Food and Agriculture Organisation (FAO) of the United Nations show, with food commodity price indices having risen for sugar to 398 points, for oils and fats to 263 points, and cereals to 238 points.

In fact, up for the sixth month in a row and fuelled by increases in these food commodity price indices, the FAO index was at it highest level, in nominal terms, since records began in 1990, topping the high of 213,5 in June 2008 – a period characterised by food riots in some countries. Potentially compounding matters was an associated poll by the agency, which showed that oil would rise to a higher average of over $86/bl this year, which could further spur food inflation.

But what is the likely impact on food prices in South Africa?

Agri South Africa (Agri SA) economist Dawie Maree says that it is likely that food price inflation will increase this year, since the prices of most of South Africa’s food products are derived from international prices.

Agri Africa member and former National Agricultural Marketing Council chairperson Professor Eckart Kassier nots that the country has moved from being a net exporter to a net importer of food, which could make the country vulnerable. At the moment, the price sting has been lessened by the stronger rand, but the rebound in the currency has also hurt farmers and their exports.

But local exports and imports and their prices will be affected by the international food commodity prices and food price indices, depending on the magnitude of the inter- national price increases. Imports will become more expensive, which could mean that more locally produced produce is sourced, to the benefit of local producers, Maree says.

He adds that export earnings might also increase as prices increase, although a strong rand would counteract the benefit. However, this is dependent on the economic recovery of South Africa’s trading partners, of which the European Union is the largest, he says.

During 2010, South African consumers were not significantly affected by the sharp rise in global commodity prices, perhaps mainly owing to the strength of the rand, says Nedbank economist Carmen Altenkirch.

“More recently, there has been a more notice- able increase in some food prices at consumer level but overall food inflation still remains very low. However, if global agricultural prices continue to rise, or even remain at their current levels, they will begin to have a more noticeable impact on domestic inflation, particularly if the rand weakens,” she adds.

Investec analyst Annabel Bishop has argued that interest rates would likely remain unchanged in 2011, with a slight possibility of one more cut in rates, at best. However, this is assuming that food and demand pressures, in general, remain subdued.

Bishop warns that the benign consumer price index outlook could be influenced by certain food price pressures that could occur in the next year owing to current poor weather conditions. “If the late rains and patchy weather conditions continue to negatively affect crops, there is likely to be greater than currently expected upward food price pressure in 2011, while the year’s economic demand is expected to pick up to 3,6% year-on-year, compared with the previous 2,8%,” she said.

Altenkirch agrees that a food price increase is likely to put some upward pressure on consumer inflation, but says that it is unlikely to cause the Reserve Bank much concern. As a result, even with a slight uptick in consumer inflation, Nedbank believes that interest rates will remain unchanged this year and well into next year.

Edited by: Martin Zhuwakinyu
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Economy News
DA MP Ian Ollis
Updated 3 hours ago The Democratic Alliance (DA) on Sunday demanded answers over the apparent inaction of Labour Minister Mildred Oliphant following a forensic audit report detailing alleged corruption by two former Nedlac executives. One of the implicated men, former National Economic...
Updated 4 hours ago Eight affiliates of the Congress of South African Trade Unions (Cosatu) have pledged not to participate in the federation's meetings until the National Union of Metalworkers of South Africa (Numsa) is reinstated. The national office bearers (NOBs) of the eight...
Article contains comments
Finance Minister Nhlanhla Nene
While the new tax introductions and hiked levies outlined in Finance Minister Nhlanhla Nene’s inaugural budget speech this week were likely to hit consumers hard, it was deemed the most efficient option for government to narrow its fiscal gap without hurting South...
More
 
 
Latest News
Updated 5 minutes ago Worldwide, the nuclear industry would benefit if it was possible to develop closer cooperation between national regulatory authorities and between them and the industry itself, as is the case with the aviation industry. This was affirmed by World Nuclear University...
Updated 1 hour 40 minutes ago Unconventional gas explorer Challenger Energy expects to hear by the third or second quarter of this year whether its subsidiary, Bundu Gas and Oil Exploration, will be allowed to explore for shale gas in South Africa’s Karoo basin. The ASX-listed company confirmed...
Updated 1 hour 58 minutes ago The seasonally adjusted Kagiso Purchasing Managers’ Index (PMI) fell by a steeper-than-expected 6.6 index points to 47.6 in February, driven chiefly by a 16.2-point decline in the business activity index (BAI) to 45.5. While January’s figure was “artificially high”,...
More
 
 
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
 
 
 
 
 
This Week's Magazine
Updated 2 hours 45 minutes ago Subscribe to Engineering News and Mining Weekly for two years, but only pay for the first year.  The weekly editions of Engineering News and Mining Weekly will be posted to your preferred postal address and also gain access to:
National flag carrier South African Airways (SAA) is in an advanced stage of renegotiating its deal with European airliner manufacturer Airbus to acquire A320 single-aisle (or narrow body) aircraft. The aim is to replace ten of the aircraft still on order with five...
Worldwide, the main thrust in the ports industry over the past decade or more has been to increase efficiency. Traditionally, ports have been run by engineers and mariners and, in the past, increasing a port’s capacity was achieved by expanding the harbour. “That has...
What do you do when an elephant has a toothache? You call Dr Gerhard Steenkamp from the University of Pretoria’s (UP’s) faculty of veterinary science, Onderstepoort, one of only two elephant ‘dentists’ in the world.
The 2015 Sanlam/Business Partners Entrepreneur of the Year (EOY) competition was launched earlier this month in Johannesburg, with the main focus on creating and inspiring entrepreneurs to create jobs and boost the economy.
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96