Food and non-alcoholic beverage inflation in South Africa increased in May by 6.7% in year-on-year terms, the Bureau for Food and Agricultural Policy (BFAP) has reported in its latest 'Food Inflation Brief'. The organisation pointed out that there had been a trend of increasing food and non-alcoholic beverage inflation since February this year and the May figure represented the highest level of food inflation since July 2017.
In terms of individual foodstuffs (as distinct from food categories), five of the typical top main food expenditure items for low-income South African families were brown bread, chicken, milk, sunflower oil and white sugar. In May, the year-on-year inflation increases for these were 40% for sunflower oil, 20% for chicken, 13% for white sugar, 8% for brown bread and 5% for milk.
“Main driving forces included plant oil supply disruptions in international markets, higher international meat prices coupled with rising input costs and tight supplies, as well as rising oil prices putting pressure on manufacturing and distribution costs,” stated BFAP. May’s food inflation rate was 0.7% higher than this April’s, while food inflation contributed 1.2 percentage points to May’s consumer price inflation of 5.2%.
The category which experienced by far the highest increase in inflation in May was oils and fats, which saw an increase of 20%. The supply disruptions which caused this jump included dry weather in the Black Sea region (reducing canola and sunflower production) and aging palm oil plantations in Malaysia, which were experiencing declining yields.
Inflation in sugar-rich food prices saw the second highest increase, at 8.7%. Meat came third, with a rise of 8.5%. The increase in the meat prices was caused by a combination of international and local factors. International meat prices had risen, while local meat supply had tightened. This latter was due to a decrease in imports from Namibia and a reduction in the numbers of animals being slaughtered in South Africa. Chicken prices were expected to remain firm in the short term because of rising input (maize and soybean) prices. The slaughtering of other meat animals was expected to increase during the rest of the year, but continuing higher international prices would underpin local meat prices.
“The strength of the [Rand] exchange rate played an integral role in keeping South African food inflation subdued during the first few months of 2021,” reported BFAP. “With a tighter monetary stance in the US emerging, the Rand seemed to start losing ground in June. A weaker Rand could fuel food inflation through increases in primary product/commodity prices, but will also impact manufacturing and distribution costs. Elevated oil prices are also expected to add to inflationary pressures in manufacturing and distribution cost with Brent-crude more than 80% higher compared to last year.”