South African consumers are being pummelled by an all-time high fuel price and escalating food inflation.
The March fuel price increase will have a severe affect on spending patterns, even on food, as consumers spend less and move to cheaper alternatives.
These are the views of Dawie Maree, head of information and marketing at FNB Agriculture.
Maree said developments in Eastern Europe will also have a major affect on the international price of wheat and maize, as Russia and the Ukraine are big exporters of these commodities.
This will put pressure on local prices, Maree said.
“We anticipate an upward trend in the consumer price index and food inflation in the short term. Food inflation reached 6.2% in the second half of January. The fuel price remains the main driver of higher costs,” Maree said
FNB Agriculture, however, forecast that it is inevitable that the fuel price shock and higher living costs will depress consumer demand in the months to come.
The slowdown in demand will force producers and retailers alike to reduce prices to attract customers. Consequently, food inflation may be lowered, albeit in the longer term.
Maree said about 80% of the country’s grains are transported by road rather than rail and the distance between production, processing and distribution is huge.
He said raw maize is transported to millers in Gauteng and the processed mealie meal is transported back to the rural areas. Maree said this disconnect between production, processing and consumption adds costs to the consumer.
On the pricing of meat, FNB agricultural economist Paul Makube said the country has had two years of relatively good rainfall, resulting in sufficient grass cover.
Makube said it is expensive to feed livestock, so it pays for farmers to hold them longer on the grass. However, they cannot keep their livestock in the veld “forever”.
“Livestock farmers are in the business of growing meat and once it is grown it has to be harvested (slaughtered). This will have a moderating affect on prices. We are coming from a high base, and it is unlikely that we will see prices escalating beyond current levels,” Makube said.
He said the price for beef T-bone reached R119/kg in January, beef fillet rose to more than R210/kg and mutton and lamb loin chops reached R185/kg.
Beef offal was priced at about R60/kg, an almost 40% year‑on‑year price increase, as consumers started opting for cheaper protein products.
Pork prices have come under pressure, with a year-on-year decrease of almost 13% for pork fillet and 2.5% for pork chops.
He said chicken is the cheapest of all the meat types and consumers have been benefiting from that.
However, Makube said there has been price growth in the chicken market mainly because of the tariff increase that negates the importation of cheaper chicken.
Makube said vegetable prices remained high mainly because of the excessive rainfall and flooding in parts of the country. This prevented farmers from getting into farmland to harvest quickly and resulted in price spikes and increased volatility.
TimesLIVE
Upward trend in food prices likely to continue, says FNB
Image: 123RF/RICHARD THOMAS
South African consumers are being pummelled by an all-time high fuel price and escalating food inflation.
The March fuel price increase will have a severe affect on spending patterns, even on food, as consumers spend less and move to cheaper alternatives.
These are the views of Dawie Maree, head of information and marketing at FNB Agriculture.
Maree said developments in Eastern Europe will also have a major affect on the international price of wheat and maize, as Russia and the Ukraine are big exporters of these commodities.
This will put pressure on local prices, Maree said.
“We anticipate an upward trend in the consumer price index and food inflation in the short term. Food inflation reached 6.2% in the second half of January. The fuel price remains the main driver of higher costs,” Maree said
FNB Agriculture, however, forecast that it is inevitable that the fuel price shock and higher living costs will depress consumer demand in the months to come.
The slowdown in demand will force producers and retailers alike to reduce prices to attract customers. Consequently, food inflation may be lowered, albeit in the longer term.
Maree said about 80% of the country’s grains are transported by road rather than rail and the distance between production, processing and distribution is huge.
He said raw maize is transported to millers in Gauteng and the processed mealie meal is transported back to the rural areas. Maree said this disconnect between production, processing and consumption adds costs to the consumer.
On the pricing of meat, FNB agricultural economist Paul Makube said the country has had two years of relatively good rainfall, resulting in sufficient grass cover.
Makube said it is expensive to feed livestock, so it pays for farmers to hold them longer on the grass. However, they cannot keep their livestock in the veld “forever”.
“Livestock farmers are in the business of growing meat and once it is grown it has to be harvested (slaughtered). This will have a moderating affect on prices. We are coming from a high base, and it is unlikely that we will see prices escalating beyond current levels,” Makube said.
He said the price for beef T-bone reached R119/kg in January, beef fillet rose to more than R210/kg and mutton and lamb loin chops reached R185/kg.
Beef offal was priced at about R60/kg, an almost 40% year‑on‑year price increase, as consumers started opting for cheaper protein products.
Pork prices have come under pressure, with a year-on-year decrease of almost 13% for pork fillet and 2.5% for pork chops.
He said chicken is the cheapest of all the meat types and consumers have been benefiting from that.
However, Makube said there has been price growth in the chicken market mainly because of the tariff increase that negates the importation of cheaper chicken.
Makube said vegetable prices remained high mainly because of the excessive rainfall and flooding in parts of the country. This prevented farmers from getting into farmland to harvest quickly and resulted in price spikes and increased volatility.
TimesLIVE
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