Economic development

Food inflation will peak early next year

In the November edition of its Food Inflation Brief, the Bureau for Food and Agricultural Policy (BFAP) noted that, while world food prices have been declining for six months, South Africa surprised on the upside in October, rising slightly to 12% year on year.

Over the past few months, beef prices have stabilised, albeit at levels of around 12% above the previous year.

“Chicken prices have increased year-on-year by almost 10%, due to the weaker ZAR, higher production costs and the worst Avian Influenza outbreak to date in the Northern Hemisphere. The effect of tariffs, and increased processing, distribution and sales costs should also not be discounted, with the significant rise in fuel prices and the high incidence of load shedding pushing consumer prices of food higher,” BFAP said.

“Our view is that food inflation will remain high over the next three months as the full effects of persistently increasing commodity prices and weaker exchange rates filter through to retail markets.

“We expect that food inflation could peak in the first quarter of 2023, after which the higher base effects apparent from March 2022 will result in smaller inflationary effects during the rest of 2023. “

It said two variables to be watched were global maize prices, which might drop, and the rand/dollar exchange rate, which could strengthen to R16.50 in the first quarter of 2023.