South Africa’s food inflation rate is dropping but, at just under 10%, it remains stubbornly high.
The Bureau for Food and Agricultural Policy (BFAP) reported that food price inflation in July was 9.9%, down from 11% the previous month. This is the fourth consecutive monthly decline since food inflation peaked at 14% in March 2023.
That’s the good news. The bad news is that July’s decline was influenced by less intense bouts of power cuts (load shedding) and a decline in the monthly fuel price. Both have got worse since then, with load shedding increasing and fuel prices rising sharply in September. Another big rise is predicted for October.
Then there’s the agricultural outlook, with food production likely to be affected by the El Nino weather phenomenon, which usually brings hotter and drier weather to South Africa for three or four years. The impact this year might not be as bad as some had feared, says agricultural economist Wandile Sihlobo, but what about the years to come? El Nino usually brings drought, and the last one in 2014-2016 was devastating.
South African consumers, and particularly low-income households, will continue to struggle for a long time to come.Go to article
A BFAP study highlights the need for investment in reducing high costs along Africa’s food value chain to combat food price inflation and make food more affordable.
Because food prices are measured at retail level, more attention should be paid to Africa’s “exceptionally high” cost increases between food production and retail sales. More investment here could help to bring down food price inflation.
This is according to a study by the independent South African research organisation, the Bureau for Food and Agricultura Policy (BFAP).
The study looked at factors influencing food inflation in four African countries – Ghana, Kenya, South Africa and Zambia. It found a lot of similarities, with exceptions being South Africa’s electricity crisis and the fact that Zambia was the only one of the four that did not need to import wheat. Recent food price spikes in Ghana were caused by extreme exchange rate volatility.
It also looked at differences between the African countries and the rest of the world. Here, the study noted that a major driver of food price inflation in Africa was “exceptionally high farm gate-to-consumer costs for both imported and domestically produced commodities”.
Noting that “ultimately food inflation is not measured at the farm gate, but rather at retail level”, the BFAP welcomed recent research into this issue, following decades of focus on producer prices. It said that “evidence clearly shows that off-farm investments in the value chain can make a significant contribution to overall value chain competitiveness and consequently lower food price inflation”.
While many factors contributed to the final retail price, energy was a common driver in the processing of all agricultural produce.
“Energy costs influence the processing and transportation of food items.”
It noted that South African food value chains have been hit by the electricity crises that the country is facing.
“Alternative sources of energy are far more expensive at approximately four times the price per unit of electricity supplied, compared to the standard rates of the national grid. These costs eventually all filter through to consumers and overall food inflation,” the BFAP said.Go to article
AgriSA has issued a stark warning that the combined challenges of electricity shortages and surging fuel costs are poised to drive up food prices in stores.
AgriSA chief executive Christo van der Rheede has warned that the combined effect of electricity shortages and escalating fuel prices would inevitably lead to higher food prices in South African shops.
Daily power outages, known as load shedding, have plagued South African businesses and households for most of this year. Now steeply higher petrol and diesel costs are adding to the pain.
South Africa’s fuel prices are set monthly, based on fluctuations in the cost of imported oil. Both petrol and diesel prices rose sharply this month, and even higher increases are forecast for October.
Van der Rheede said diesel was essential for farming operations, and it looked like a high spike in diesel prices last year was going to be repeated this year. Under high levels of load shedding, expensive diesel, for operations and to run generators, hits the whole food value chain, from farms to processing and storage facilities, logistics and transport, and distribution and retail centres.
He described the electricity and diesel price rises as a “double blow” for agriculture. He called for an increase in the diesel rebate for agriculture, as it was now insufficient to counter the cost increase.
South Africa’s agricultural sector was becoming unprofitable and uncompetitive in the global market.
“We are at the point where we cannot compete with Namibia, where the diesel price is far less than South Africa. It’s going to have a negative impact on food inflation and the price of products,” Van der Rheede said.Go to article
Bird flu outbreaks, which have led to over four million chicken cullings and substantial financial losses, are now causing egg shortages in some areas, likely resulting in increased egg prices.
Bird flu outbreaks in South Africa this year have resulted in a record number of cullings at poultry farms, and have started to cause egg shortages in some centres.
Farmer’s Weekly reports that more than 25 outbreaks of bird flu have been recorded so far this year, resulting in the culling of more than four million chickens. This already exceeds the three million culled the previous year and makes 2023 the country’s worst in terms of industry losses due to bird flu.
Most of the outbreaks have been at egg-producing farms. This has cost egg farmers more than R2 billion, according to Dr Abongile Balarane, head of the layer organisation at the SA Poultry Association (SAPA).
Both Balarane and the head of SAPA’s broiler organisation, Izaak Breitenbach, have pointed out that, unlike other countries, the South African government pays no compensation for the millions of healthy birds that have to be culled to contain an outbreak. This adds to the cost burden of an industry already suffering because of electricity outages and higher feed costs.
The poultry industry is in discussion with the government about the possible use of bird flu vaccines to control the disease without the need for mass cullings.
A new development is egg shortages in some South African cities. The Daily Maverick reported that major retail groups are warning customers that bird flu is reducing the provision of eggs from suppliers. In addition to shortages, egg prices are likely to rise, the publication said.
In an interview with Radio 702, Dr Balarane assured consumers that eggs for sale in the shops were safe.
As soon as bird flu is detected on a farm, health regulations require that all eggs on the farm be destroyed, all chickens be culled and all feed on the farm also be destroyed, he said.Go to article
New Zealand scientists are researching lab-grown fruit tissue to combat climate-driven food shortages, but this process, including regulatory approvals, may still take years.
New Zealand is developing an answer to potential shortages in one part of the food chain – when floods or drought deprive a nation of fruit, you can grow it in a laboratory.
Well not quite, and not quite yet. But scientists at Plant & Food Research in the southern city of Christchurch are aiming to grow fruit tissue from plant cells that they hope will one day taste, smell and feel like real fruit.
The programme aims to grow fruit tissue without the parts that are usually discarded, like the core of the apple or the rind of an orange.
“Researchers hope that the programme will help safeguard the country’s food security,” according to a report in the Guardian in London. The scientists say that climate change will result in less land to grow the food needed for an expanding global population.
It could be some time before these efforts yield results. Like lab-grown meat, the programme is at the early stages of development. Then it will still face a number of obstacles, including regulatory and food safety approval.
This could take “years if not decades,” according to a New Zealand scientist not involved in the lab-fruit programme.
Not every tree bears fruit.Go to article
South African consumers will come under added pressure in the months ahead as increases in the price of chicken – the country’s most popular and most affordable meat protein – lead to agonising choices in retail stories.
Consumers are also likely to be battered by floods of misinformation from chicken importers, claiming wrongly that the price increases are due to the recent imposition of anti-dumping duties on dumped chicken imports.
Despite these misleading claims, the facts have been clear for a long time – poultry producers are making huge losses because of the cost burdens of daily power cuts, known as load shedding, and steep increases in the price of feed, which constitutes 70% of the cost of raising a chicken.
Some details were given in May, when South Africa’s largest poultry producer, Astral Foods, announced results for the first half of its financial year. Operating profit was down 88%, with load shedding costs of R741 million in that half year, and a projected R844 million in the second half.
The company was selling chickens at a loss because the costs of load shedding and more expensive feed could not be recovered in selling prices.
It’s a similar story at RCL Foods, owner of the second largest poultry producer, Rainbow.
RCL this week announced results for the year to end June – headline earnings were 46% down, with losses at Rainbow because of load shedding and feed costs.
In a radio interview, RCL CEO Paul Cruickshank said the whole poultry industry was making losses and chicken prices would have to rise if they were to stay in business.
“The chicken prices do need to increase; I mean, our results are clear in the losses we’ve posted for Rainbow, and the competitors will be very similar. We are up against a consumer who can’t afford to pay… but chicken businesses across the country are making losses.”
Both producers have kept prices down because consumers are reluctant to pay more. That may not last, because selling at a loss if not a sustainable business model.
Beware, the Competition Commission is watching
A further complication for struggling poultry producers is that the anti-dumping duties imposed on five countries in August may be revoked if the Competition Commission thinks they’re profiteering.
Trade, Industry and Competition minister Ebrahim Patel said he would ask the commission to monitor price rises. If there were unjustified increases “aimed at taking advantage of the introduction of the anti-dumping duties”, then the duties could be suspended.
Trouble is, this is the same Competition Commission that got it embarrassingly wrong earlier this year, using flawed reasoning to suggest mistakenly that price rises showed that producers and retailers were exploiting consumers. It seemed to ignore the impacts of the war in Ukraine, rising feed prices and the huge burden of load shedding.
All three factors are still present. Let’s hope that the commission gets the telescope the right way round this time.Go to article