Food price inflation moderates somewhat in October

19th November 2021 By: Schalk Burger - Creamer Media Senior Deputy Editor

Inflation on food and non-alcoholic beverages (NAB) for October was 6.1%, a slight moderation from September levels.

Among food categories that exhibited the most significant inflation, oils and fats increased by 20.9% year-on-year, meat by 9.1% and vegetables by 7.2%, mainly driven by high global commodity prices and rising input costs, the Bureau for Food and Agricultural Policy (BFAP) says.

The October 2021 Stats SA food inflation showed that high meat prices are mainly driven by constrained supplies owing to herd rebuilding and high feed costs, while high vegetable oil prices are mainly attributed to competing demand from feedstock for biofuel, rising crude oil prices, supply constraints over the past year in key global production areas and dramatically rising shipping costs.

"After increasing steadily from 5.4% in January to 6.9% in August, monthly year-on-year inflation on food and [NAB] decreased somewhat to 6.1% in October 2021," the report, which is is a collaboration between BFAP and Dr Marlene Louw from Absa Agribusiness based on Statistics South Africa CPI and food retail price data, says.

Food inflation for October was recorded at 6.7% while food and NAB inflation came in at 6.1%, showing a slight moderation from September levels, where these two categories were recorded at 7% and 6.6% respectively.

Most of the key factors driving inflation over the past months are still in play, the report shows.

"Over the coming months, cost pressures in the rest of the value chain, such as increased manufacturing and distribution cost, are likely to limit the downward scope in food inflation. Here, movements in the rand:dollar exchange rate and the prices of crude oil will be key to watch."

The cost of the BFAP Thrifty Healthy Food Basket, which measures the cost of basic healthy eating for low-income households in the South African context and consists of a nutritionally balanced combination of 26 food items from all the food groups to feed a family of two adults and two children for a month, amounted to R2 931 in October.

Food groups with high inflation during 2021 were consistently dominated by fats and oil, with high inflation also prominent for animal-protein foods, namely meat, dairy, eggs and fish.

Commonly bought food items with year-on-year inflation rates above 10% in October included sunflower and canola oil, beef, potatoes, mutton or lamb, pork chops and ribs, super and special maize meal, chicken, dried and baked beans.

Commonly bought food items with inflation rates from 6% to 10% included pork ham, bacon and fillets, tinned pilchards, chicken giblets, pasta, beef brisket, t-bone, chuck, rump steak and mince, brick margarine, fish fingers, stewing mutton or lamb and peanut butter.

Food prices for bread and cereal increased 0.4% over the month and 3% compared withOctober 2020. Meat increased 0.5% during the month and 9.1% over a year, fish prices increased 0.1% on the month and 4.2% over a year, milk, cheese and eggs prices increased 0.1% during the month and 5% over a year, oils and fats prices grew 1.7% on the month and 20.9% over a year.

Further, fruit prices increased by 2.6% from September, but decreased by 2.3% compared with October 2020. Vegetables prices increased 6.3% during the month and 7.2% over a year while sugar and sugar-rich foods prices increased 0.2% during the month and 4.6% over a year. Non-alcoholic beverages prices grew 0.7% month-on-month and 2.3% year-on-year.

Illustrating the continuing pressures on prices, the BFAP report highlighted that although meat inflation has moderated to 9.1%, the growth in prices and its expenditure share in the consumer price inflation food basket still make it the largest driver of inflation over the past month.

Market stakeholders are, however, reporting that producers are continuing with herd rebuilding, which constrains calf supply for feedlots. This, along with high input costs in the form of feed, has resulted in lower slaughter numbers, which, in turn, kept retail prices for meat at elevated levels compared with 2020.

September 2021 slaughterings are about 3% lower than in the corresponding time in 2020. It is expected that prices will remain firm but that inflationary rates for meat will ease off over the coming months, the report said.

"Other contributing factors to food inflation, such as high oils and fats, have been highlighted in BFAP's previous reports. The global factors leading to these high prices are still at play and it is expected to remain for the foreseeable future. This includes high demand for oilseeds used as feedstock for biofuel, strong growth in global energy costs, specifically crude oil prices, and supply constraints over the past year in key production areas around the globe," the researchers said.

This trend is further exacerbated by sharp increases in shipping costs, which further drives up the cost of imported vegetable oils.

"Over the past month, there has also been a significant uptick in vegetable inflation. This is largely attributed to high potato prices as a result of low volumes during September and early October."

However, since then volumes have increased significantly and prices are now more than 30% lower compared to early October. It is expected that vegetable prices will continue to come down and as a result, also cause inflation for this group to trend lower for the rest of 2021.