The Competition Commission notes in its latest ‘Essential Food Pricing Monitoring (EFPM)’ report for 2021 and 2022 that maize meal, sunflower oil and white and brown bread had seen opportunistic and unjustified price increases over the last two years.

As poor consumers continue spending a significant portion of their income on essential food items, given high inflation and loadshedding costs to business, the commission says food price monitoring will remain a priority.

This eighth EFPM report since 2020 continues to point to concerning features in several food markets, as do the predecessor reports, including large differences between what farms get paid for food items and in-store prices.

Other concerns include growing margins at the processor and retailer level and potential opportunities pricing behaviour for staple foods such as bread and cooking oil.

The commission is investigating the price of a range of essential food products, including bread, cooking oils, maize meal, rice, flour, margarine and pasta at the retail and wholesale levels.

Additionally, the commission last week launched a Fresh Produce Market Inquiry to look into the value chain of certain fruits and vegetables, to determine whether anti-competitive behaviour is taking place.

Since the prices of many fruits and vegetables were volatile in 2022, the commission intends to undertake an in-depth analysis on these price movements and how the value chain operates.

Meanwhile, from January to December 2022, white and brown bread retail prices have increased faster than producer prices at 20% and 19%, respectively, compared with 15% and 14% producer price increases for the two items, respectively.

This implies that the shelf price increase to R18.62 from R15.47 for white bread over 2021 and 2022, and to R16.61 from R13.99 for brown bread, between January and December, may not be justified by costs.

The price of maize meal increased by 32% year-on-year, rising from R26.62 to R35.29 from January to December, while the South African Futures Exchange price of white maize increased at a slower rate, resulting in the price of maize charged by farmers being a lower proportion of the retail price of maize meal over the 12 months.

The commission deems this concerning and says it may well indicate opportunistic behaviour throughout the value chain. It also raises a question about the use of export parity pricing throughout the maize value chain.

POULTRY

The commission focuses on the feed-to-poultry value chain in its latest EFPM, particularly individually quick-frozen chicken products.

Feed costs account for more than two-thirds of broiler production costs and are, therefore, a source of upward cost and pricing pressure throughout the poultry value chain, the commission explains.

The feed-to-poultry value chain is highly concentrated, with five firms making up 70% of total chicken production. The top two firms, in fact, make up 50% of the market.

The commission finds that the price of grains and oilseeds used to manufacture animal feed – wheat, maize, soya beans and sunflower oil – were volatile over 2021 and 2022. 

The EFPM foresees that raw material costs may fall over the first half of this year. The commission will monitor the extent and degree to which these reductions are transmitted to feed prices and, ultimately, to chicken prices at the retail level.

Feed prices increased faster than the producer prices of individually quick-frozen chicken products, which are the most widely consumed chicken products in South Africa. despite this cost pressure, producers reported improvements in their financial performance, largely driven by high feed prices.

The commission also finds that, when chicken imports from the European Union were banned in 2022, in response to an avian influenza outbreak, domestic producer prices increased.

This anomaly warrants further investigation, the commission states, announcing it will closely monitor the developments in the poultry sector to ensure that consumers are not subjected to unjustified price increases.