Food prices remain high, Competition Commission's latest report shows

05 October 2024 - 08:00
By Ernest Mabuza
The Essential Food Price Monitoring report finds that easing food cost pressures have been slow to translate into lower food prices in several essential food value chains
Image: 123RF/Richard Thomas The Essential Food Price Monitoring report finds that easing food cost pressures have been slow to translate into lower food prices in several essential food value chains

The Competition Commission said on Friday there have been several positive signs of easing food cost pressures throughout the economy since the publication of the last Essential Food Price Monitoring (EFPM) report in May. 

It said the challenge was to ensure these easing food cost pressures rapidly reflected in lower retail food prices rather than an outcome where processors and retailers were slow to pass through cost reductions to consumers. 

The latest EFPM report found that easing cost pressures had been slow to translate into lower food prices in several essential food value chains. 

The commission observed that prices remained high and were increasing at a rate that was unaffordable for low income households.

Despite lower farmgate prices for wheat, the producer price of brown bread had increased over the period under review. It found a steep decline in the average producer price of cooking oil had not translated into lower average retail prices. 

The commission said one of the reasons for easing food cost pressures was that the country had experienced several months without load-shedding as Eskom’s generation performance had improved. 

The 2021 to 2023 period had coincided with some of the most severe periods of load-shedding South Africans had ever experienced which was cited as a leading cost pressure keeping prices higher for longer. 

Another reason was that the rand had strengthened against the US dollar and other currencies. 

“In the food value chain, many of the chemicals that support crop development such as fertilisers and pesticides are imported from Eastern Europe. South Africa is also a net importer of wheat and oilseeds.

“Finished products such as frozen chicken and pilchards are also imported. The strengthening of the rand should contribute to lower import prices should it be maintained,” the commission said. 

It said local fuel prices had been on a downward trajectory.

Transport is the leading contributor to the prices that consumers pay for the goods they consume and for the past 10 to 20 years, local businesses have become more reliant on road transport, as opposed to rail. 

“During the last six months, there have been several successive fuel price cuts propelled by the stronger currency and lower international oil prices. This positive trend may contribute to easing food price increases.” 

However, the commission said the effects of the midsummer drought of 2023/24 were still being felt by consumers. 

“The midsummer drought caused a 25% loss to South Africa's white maize harvest leading to higher white maize prices.” 

The commission said as was the norm, upstream or farmgate prices did not immediately reflect in producer and consumer prices.

“The effect is likely to be felt in the consumer prices. The effect is likely to be felt in the closing months of 2024 up to the first quarter of 2025.” 

It added that a bitter winter in some parts of the country had caused widespread crop damage.

“Following a cold weekend that included heavy rains, farmers in Limpopo reported that they had been affected by black frost, leading to considerable losses.”

The affected regions included the Soutspansberg mountain region, Levubu, Marble Hall, Arabie and Bela-Bela. The crops that were most severely affected included potatoes and tomatoes. 

The effects of avian flu still lingered in the local poultry market. The commission said the avian flu outbreak last year had a devastating effect on the local poultry market resulting in 8.5-million chickens being culled between April and November 2023. 

Producer and retail prices for eggs remained considerably above pre-avian flu outbreak levels, it said.

“The culling caused large financial losses and some business closures in the industry.” 

The report also included an analysis of financial market speculation and implications for prices in food markets. The analysis assessed whether the recent commodity prices levels and increases had been driven by an increase in speculation in the local market.

Financial market speculation is trading in financial instruments for agricultural commodities to profit from a change in the value of the instrument instead of using that instrument to control the risks of unfavourable price changes.

The analysis did not find evidence that speculation drove up the prices of white maize, wheat and sunflower seeds.

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