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.)

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions. publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.