Encouraging news for South Africa’s cash-strapped consumers is that food price inflation is close to its peak, and may already have peaked.
This is the view of investment analyst Casey Delport, writing in Business Report. Not everyone agrees, however, with several predictions of continuing food price increases.
As FairPlay has noted previously, the world food price index remains high but has been dropping for months – Delport said it dropped again in August, making it five months in a row – while food price inflation in South Africa is still on the rise.
Global grain prices shot up after Russia’s invasion of Ukraine, but have eased with the agreement to export Ukraine’s wheat and maize. Delport says it takes three to four months for grain and oilseed price changes to filter through to retail prices.
He notes a number of factors that could change, but remains cautiously optimistic. “If one considers all of the abovementioned factors, our view is that food inflation is close to peaking – if the July figures were, in fact, not at the peak already.
“Consider that commodity prices were higher in the latter half of 2021, resulting in lower base effects. This, combined with easing global commodity prices, could result in food prices losing momentum,” he says.
While the risks for world food prices “remain tilted to the upside” Casey believes “SA will likely remain an exception from the rest of the globe, with food price inflation contained at relatively lower levels than most other regions.
“Importantly, the coming months will likely show moderation from the heightened levels we saw in July.”
A significant drop in South Africa’s food price inflation could bring an early end to the 12-month suspension of anti-clumping duties on chicken imports from Brazil and four European Union countries.
Trade, Industry and Competition minister Ebrahim Patel has given this assurance, and he will no doubt be watching the numbers closely.
