Basic food prices set to soar

2012-09-01 00:00

CONSUMERS should hold on tight to their wallets this festive season, particularly when it comes to filling up their grocery baskets.

Economists told Weekend Witness that food prices — particularly proteins like meat, dairy products and eggs — could rise as a result of the knock-on effects of drought in the U.S. and adverse weather in South Africa, as well as higher demand for food during the festive season.

An agricultural economist with FNB, Jan van Zyl, told Weekend Witness that prices could rise by as much as 15% to 20% during the festive season.

Although the market had priced in the weather factor in the U.S. and South Africa, he said, maize prices could also rise during this period.

Local farmers could see value in exporting their stocks, thereby depleting domestic maize supplies and increasing the threat of higher prices.

In addition, the drought in the U.S. had bolstered grain prices. Furthermore, prices could rise in the festive season as consumers tended to buy more food during the holiday season, Van Zyl said.

The World Bank said in its Food Price Watch report this week that global food prices rose by 10% in July compared with June, driven by soaring maize and soybean prices.

The chief economist of Investment Solutions, Chris Hart, told Weekend Witness that higher food prices meant consumers would have less money to spend on other budgeted items.

The senior manager of the markets and economic research centre at the National Agricultural Marketing Council (NAMC), Dr André Jooste, told Weekend Witness that beef and maize product prices would follow an upward trend between September and the festive season.

The NAMC’s Food Price Monitor for August shows that food inflation declined throughout 2012, but it pointed to higher food prices in the months ahead.

While there was blame being laid at the door of producers and retailers, Jooste and Van Zyl noted that all role-players in the value chain were taking strain.

Jooste said it was unfair to blame beef producers for the trend, as they were being squeezed by a combination of weaker consumer demand, surplus meat supply, higher input costs, the effects of exchange rate fluctuations and the after-effects of the adverse weather in grain-producing regions of the world.

Van Zyl said consumers would be in a difficult situation in the months ahead.

“It’s not always easy for consumers to stockpile. In the case of meat, if you don’t have a freezer, what do you do?

“However, consumers do substitute, moving from more expensive cuts like steak to cheaper cuts like stewing beef … or even processed meat like polony. They even move to carbohydrates, but this is mainly in the case of poor households,” said Van Zyl.

The NAMC’s food price monitor contained key warnings: “The increase in food prices over the next three months will be led by cereal prices, where the latest projections show that year-on-year bread price inflation will pick up significantly over the outlook period and could peak even above 20% over the period January to March 2013.”

“The increase in cereal prices will likely be followed by meat prices, with some early indications that a rationing of demand for feed grains is already being considered in some of the major meat producing countries.”

The monitor’s basic food basket cost R428 in July 2012 — R32,27 more when compared to July 2011.

Average food price trends:

July 2011 July 2012

White bread R8,90 R9,34

Brown bread R7,99 R8,25

2,5 kg cake flour R18,85 R18,20

5 kg maize (super) R24,74 R28,75

750 ml sunflower oil R15,76 R16,67

500 g margarine R16,24 R16,30

420 g baked beans R8,46 R7,98

White sugar 2.5kg R20,79 R23,22

1,5 dozen eggs R24,91 R26,72

1 litre sachet full cream fresh milk R6,93 R7,50

TOTAL: R153,57 R162,93

(Source: The NAMC’s Food Price Monitor.)

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