South African food and non-alcoholic beverage inflation jumped 8.6% last month, in year-on-year (y-o-y) terms, the Bureau for Food and Agricultural Policy (BFAP) has reported, in its latest ‘Food Inflation Brief’. In month-on-month (m-o-m) terms, food and non-alcoholic inflation in June was up 1.2%. This inflation contributed 1.5 percentage points to the consume price index headline inflation figure of 7.4% last month.

“The full effect of the commodity price shock of the Russian Ukraine invasion on grains and oilseeds is now apparent, with inflation on bread and cereals amounting to 11.2% and oils and fats recorded at a staggering 32.5%,” highlighted the BFAP. “Underlying global commodity prices did however ease in June due to aggressive increases in the US interest rate. Downward grain price trends gathered further momentum in July with talks of increased exports from Black Sea areas such as Ukraine, which would affect global wheat availability and prices.”

But during the middle of this month global maize and soybean prices began to accelerate again, as a result of the heatwaves across key production areas in the European Union and the US. Northern hemisphere weather and US interest rates would be key factors to watch in the coming months, regarding global food prices and demand. (Bad weather could reduce supply but higher US interest rates could cut demand.) These effects would affect local prices, although weak rand exchange rates would reduce their impact.

Globally, prices for all forms of meat stood firm in June. Chicken prices actually went up, owing to avian flu outbreaks in key production areas. This allowed increases in local chicken prices. Local beef carcass prices seemed to have stabilised around R60/kg, in part owing to foot and mouth disease “issues” around the country. The BFAP expected that meat prices would stay firm over the next few months.

The y-o-y inflation in food categories last month, from highest to lowest, apart from the previously mentioned oils and fats (32.5%) and bread and cereals (11.2%), were meat (9.5%), fish (6.7%), sugar and sugar-rich foods (5.7%), vegetables (5.6%), non-alcoholic beverages (5.5%), milk and cheese and eggs (4.7%) and fruit (0.3%). M-o-m inflation ran from 5.9% for oils and fats, through 2.6% for bread and cereals, 1.4% for both milk and cheese and eggs, and sugar and sugar-rich foods, 1.1% for fish, to 0.9% for non-alcoholic beverages. Vegetables and fruit both recorded m-o-m deflation, of 0.2% and 4.9% respectively.

Those commonly bought food items with a y-o-y inflation above 10% last month were (in the order given by the BFAP) – staples (wheat flour, maize meal, bread and pasta), beef (offal, rump steak, T-bone steak, sirloin), mutton and lamb (rib chops, neck), polony, ham, frozen hake, individually quick-frozen (IQF) chicken portions, fats and oils (plant oil, margarine), vegetables (broccoli, cucumber, beetroot, cauliflower, cabbage and lettuce), tinned baked beans, pineapple, avocados, instant coffee and whiteners. Those food items with y-o-y inflation from 6% to 10% in June were (again in the BFAP’s order) – beef (chuck, brisket, mince and fillet), canned pilchards, non-IQF chicken portions, bacon, sugar-rich foods, pork ribs, tomatoes, dried beans, cheese, stewing mutton and lamb, and white sugar.

The cost of the BFAP’s Thrifty Healthy Food Basket (THFB) jumped 9.3% in y-o-y terms, or by R270. In m-o-m terms, the increase was 0.4%, or R13. The THFB was nutritionally balanced, containing 26 food items from all the food groups, and designed to feed a family of two adults, and an older child and a younger child, for a month. Assuming the family earned two minimum wages and benefitted from child grants and school feeding, the THFB would have consumed 30.4% of their total income last month.

The June food prices showed that inflation in the sector “continued to gain momentum”, noted the BFAP. For July, high diesel prices were likely to have a major impact on food prices, while load-shedding during this month (by driving up production costs) could also boost food inflation this month and next month, the Bureau warned.