3 months ago
Food prices were a significant discussion point worldwide last year. South Africa had a fair share of elevated prices in the first half of the year, with the pace of increases slowing somewhat towards the end of 2023.
The December 2023 consumer food inflation data showed further deceleration to 8.5% in December, from 9% in the previous month (and against market expectations of a slight uptick to 9.3%). The product prices underpinning this deceleration were primarily bread and cereals, oils, fats and vegetables.
The Agricultural Business Chamber of South Africa expects this moderation path to continue in 2024 for most of the products in the food basket.
The significant risk to meat supplies that animal diseases such as avian influenza presented in 2023 could ease this year. There will probably be a recovery in poultry production following a range of interventions that the industry and the government embarked on at the end of last year.
These included the importation of fertilised eggs to rebuild the parental bird stock, importing table eggs (powder and liquid eggs used in the baking process to free the whole eggs for human consumption), and vaccinations to curb the spread of the disease (although there remain some delays with approvals of some vaccines by the authorities). We did not notice any recorded shortages of poultry products over the festive season.
An additional policy measure the government has in addressing potential shocks on poultry meat supplies is enabling poultry product imports in the event of supply constraints, which we do not anticipate in the foreseeable future.
Fruit and vegetable prices, which remained elevated towards the end of 2023, will probably slow in the coming months because of an estimated increase in the volume of seasonal products.
The supply constraints in some vegetables last year, mainly potatoes, were caused by the bad harvest. We expect improvement in 2024, regardless of the reports of pepper ringspot virus in a few potato farms in the northern regions of South Africa.
Although we are in an El Niño period, the weather conditions have been quite favourable across South Africa. The agricultural conditions are excellent, and we believe that farmers planted the intended area of 4,5 million hectares for the 2023-24 season, up 2% year-on-year.
We expected favourable yields across the country, even in North West, where rainfall has not been as high as in other regions of South Africa. The Crop Estimates Committee will this week release the preliminary planting data but we are optimistic that farmers planted this area.
Moreover, crop yields will probably be broadly excellent given the favourable rainfall across the country since the season started. What is vital is for farmers to receive rain in February, a pollination period that is key to yield development.
This potentially improved domestic agricultural supplies and a generally sizable global harvest bodes well for continuously moderating consumer food price inflation in 2024.
At the international level, the figures from the United Nations Food and Agriculture Organisation (FAO) already show continuous moderation in agricultural commodity prices. For example, the FAO Food Price Index, a monthly agricultural commodity price index, eased at 118.5 points in December 2023, down 2% from its November level and 10% year-on-year.
This decline was underpinned by the easing price indices for sugar, vegetable oils and meat. This declining price trend could continue in the coming months if the positive global crop yield prospects hold.
Ultimately, food prices in 2024 may not be as major an issue as they were the previous year, assuming that risks such as energy prices and shipping routes are not majorly disrupted for a prolonged period by the ongoing geopolitical tensions. Domestically, the agricultural production conditions are promising and signal continuous moderation in prices.
Wandile Sihlobo is chief economist at the Agricultural Business Chamber of South Africa and author of A Country of Two Agricultures.
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