Last month, South African food and non-alcoholic beverages (NAB) price inflation rose 6.3% year-on-year (April 2020-April 2021), the Bureau for Food and Agricultural Policy (BFAP) has reported in its “Food Inflation Brief – April 2020”, published this week. In month-on-month (March 2021-April 2021) terms the increase was 0.9%. This, however, was far below the record inflation of 11.8% recorded in October 2016, during the country’s 2015-2016 drought.
Food and NAB were the source for 1.1 percentage points of the annual consumer price index (CPI) headline inflation of 4.4%. Food and NAB inflation was the second biggest impetus to overall CPI, after transport, which contributed 1.5 percentage points. (‘Housing & utilities’ came third, adding 0.6 percentage points).
Food was subdivided into nine categories for the purposes of price analysis. These were – bread and cereals; fish; fruit; meat; milk, eggs and cheese; oils and fats; sugar, sweets and deserts; vegetables; and ‘other food’. Of the main categories (that is, all those except ‘other food’), all except bread and cereals and fruit experienced annual inflation of more than 5% last month.
The category with the highest year-on-year increase was oil and fats, at 16.7%. This was due to a surge in international prices which started in the middle of last year. This, in turn, was the consequence of firm oilseed demand in China, coupled with supply shortages, resulting from dry conditions in the Black Sea region and labour issues in major palm oil producing nations.
But a key driver for local food inflation was meat, which experienced an annual inflation rate of 7.1% last month. Meat accounted for the single largest share in a South African food expenditure basket, amounting to 31.7%. Meat supply was tight as farmers sought to expand their herds after several years of drought, which saw elevated levels of slaughtering. Further, the price of maize, used in feedlots to fatten up animals, has risen. Higher demand during the Easter season also pushed up prices.
Milk, eggs and cheese saw an annual inflation rate in April of 7.8%. This was caused by inflation in global dairy product prices and significantly increased local production and distribution costs. Egg prices were further affected by avian flu outbreaks in different parts of the country.
Overall, fruit prices were stable, year-on-year, and declined month-on-month. Regarding vegetables, a 6.3% annual inflation in April was largely the result of a 59% increase in tomato prices (year-on-year), due to supply constraints. On the other hand, the price of potatoes fell by 23%, while the price of onions dropped by 19% and that for pumpkins declined by 13%.
“In our view, two key overarching drivers played a significant role in edging local [food and NAB] inflation higher,” reported the BFAP in its brief. “The first is high global commodity prices and the second is an increase in domestic manufacturing and distribution costs. Our view is that neither of these factors will abate soon. Over the medium-term global commodity prices will return to more normalised levels.”