South African food and non-alcoholic beverage (NAB) inflation – hereafter to be referred to simply as food inflation – dropped “sharply” last month, in year-on-year (y-o-y) terms, to 11.8%, the Bureau for Food and Agricultural Policy (BFAP) has reported in its latest “Food Inflation Brief”. In month-on-month (m-o-m) terms, the country’s food inflation was 0.3% in May. This y-o-y deceleration follows 11 months of rising food inflation, and brings it back down to levels close to those recorded last September. Food inflation contributed 2.1 percentage points to the y-o-y consumer price index headline inflation figure of 6.3%.

Nevertheless, out of the countries and blocs whose food inflation trends BFAP notes, for comparative purposes (namely Brazil, China, the European Union [EU], Kenya, the US, and Zambia), only the EU recorded higher y-o-y food inflation than South Africa, last month. (The figure for the EU was 15%, while Zambia recorded 11.6%, Kenya 10.2%, the US 6.7%, Brazil 5.5% and China 1%.)

“With the exception of vegetables, producer prices in South Africa are on a declining trend,” stated the BFAP in its Brief. “These declines are starting to reach retail markets for some products and will likely continue to filter through the value chain in the coming months. Nevertheless, loadshedding and the associated cost of alternative energy sources remains a major cost driver across the value chain, which may offset some of the decline at retail level. Good news for producers is that the cost of agricultural inputs in May 2023 continued its downward trend from December 2022 levels, despite a weaker rand, with average fertiliser costs declining by 4% m-o-m. The cost of diesel also continued its downward trend in May 2023. These cost reductions will influence producers’ future planting decisions and supply prospects in the coming season.”

The food category with the highest y-o-y inflation last month was vegetables, at 20.8%. This was followed by bread and cereals, at 18.1%, and then dairy and eggs (14.2%), sugar-rich foods (11.9%), NAB (10%), fish (9.7%), and meat (7.1%). Oils and fats recorded deflation of 2.4% and fruit saw deflation of 3.3%. In m-o-m terms, the food category with the highest inflation was sugar-rich foods (2.2%), followed by dairy and eggs (1.5%), bread and cereals (1.1%), NAB (0.4%) and vegetables (0.1%). No fewer than four food categories saw m-o-m deflation – fruit (down 7.9%), oils and fats (down 2.2%), fish (down 0.9%) and meat (down 0.4%).

The individual food items with the highest y-o-y inflation in May were (in the order given by the BFAP) wheat flour, bacon and ham, cheddar cheese, onions, broccoli, cauliflower, spinach, pumpkin and peppers, pineapples and baked beans. These all recorded inflation of 30% or more. Food items which saw y-o-y inflation running from 20% to just under 30% were baked goods, pasta and bread, corned beef, canned pilchards, frozen hake, polony, sour milk, carrots, potatoes, cucumber, avocados, sunflower oil, sugar-rich foods, coffee, fruit juice, and Ceylon tea. On the other hand, those food items which registered y-o-y deflation last month were rice, mutton and lamb leg, pork chops, papaya, oranges, bananas, pears, mineral water, and sunflower oil.

The price of the BFAP Thrifty Healthy Food Basket (THFB) increased in May by 14%, or R443, y-o-y, and by 0.3%, or R11, m-o-m. The THFB is composed of 26 nutritionally-balanced food items from all the food groups and is designed to feed a family of two adults and one older and one younger child for a month. Assuming that family earns two minimum wages and benefits from child support grants and school meals, the THFB would have consumed 31.5% of their total income.

“While food inflation remains high, May 2023 numbers provided a sharp decline from recent months and the first solid indication of a turnaround,” pointed out the BFAP. “This momentum is expected to persist over the coming months, with food inflation expected to continue trending downwards, reflecting strain on consumer budgets, high base effects, the relative recovery in the value of the rand over the past month and the filtering through of the recent lower producer prices to retail level. The relative strength of the rand remains a key factor to watch, as the high-risk environment, both domestically and globally, could trigger sharp movements that affect price levels. Another sharp depreciating cycle will gain drive food prices higher.”