South African food and non-alcoholic beverage inflation hit 9.7%, in year-on-year (yo-y) terms, in July, the Bureau for Food and Agricultural Policy (BFAP) has reported. This is the highest level since the severe drought in the country during 2016 and 2017. However, the South African figure is still noticeably behind the year-on-year food inflation rates for Zambia (11.3%) and Kenya (15.3%). (Among global major food markets, the equivalent numbers were 10.9% for the US, 12.8% for the European Union and 14.7% for Brazil.)

In month-on-month (m-o-m) terms, South African food and non-alcoholic beverage inflation in July was up 1.1%. The sector contributed 1.7 percentage points to the consumer price index y-o-y headline inflation figure of 7.8%.

“[T]he effect of the Russian invasion of Ukraine in late February, which caused prices for grains and oilseeds to surge during March and April, is likely still affecting local bread and cereal prices, which recorded an inflation of 13.4% in July,” stated BFAP in its 'Food Inflation Brief', released on Wednesday. “Research has shown that price shocks in local grain and oilseed markets take approximately 3 to 4 months to fully transmit to retail prices and although global prices for these commodities have eased over the past weeks, a weaker [rand] exchange rate and persistently high global shipping costs are keeping local commodity prices elevated.”

The continuation of high prices for grain, a major input for the meat producing sector, is keeping meat prices elevated. Moreover, the number of cattle slaughtered in June was 3% down in y-o-y terms, with this year so far having been marked by reduced slaughter numbers. While the figure for July was not yet available, the BFAP expected the recent trend of lower slaughter numbers to continue.

Poultry prices continued to be boosted, in line with international markets, because of supply constraints in the northern hemisphere. These included the continuing spread of Avian influenza.

Wet and cool weather, affecting yields, and firm consumer demand, significantly boosted the prices of key vegetables in South Africa.

In terms of the various food categories, oils and fats recorded the greatest y-o-y inflation, at 36.2%, followed by bread and cereals, at 13.7%, then fish (9.7%), meat (9.4%), vegetables (8.3%), sugar and sugar-rich foods (7.5%), non-alcoholic beverages (6.3%) and milk, cheese and eggs (5.5%). Fruit recorded deflation of 1.4%.

In m-o-m terms, the ranking was oils and fats (3.2%), bread and cereals (2.4%), fish (2%), vegetables (1.5%), milk and cheese and eggs (0.7%), meat (0.5%), sugar and sugar-rich foods (also 0.5%) and non-alcoholic beverages (again 0.5%). Once more, fruit recorded deflation, of 1%.

Regarding food items, those that registered year-on-year inflation rates of more than 10% were, in the order given by the BFAP, vegetables (spinach, broccoli, cauliflower, beetroot, onions, cucumber, tomatoes, lettuce, cabbage), fruit (oranges, avocados, apples), fats and oils (vegetable oil, margarine), legumes (canned baked beans, dried beans), pork (ham, bacon), beverages (Ceylon or black tea, coffee, fruit juice), starch-rich foods (wheat flour, super maize meal, brown bread, pasta, white bread), beef (T-bone, brisket) and canned pilchards. Those that recorded year-on-year inflation of between 6% and 10% (again, in the BFAP’s order) were mutton and lamb (neck), beef (chuck, rump steak, mince, offal), dairy (yoghurt, milk, cheese) chicken (individually quick-frozen portions, giblets) and peanut butter.

The price of the BFAP’s ‘Thrifty Healthy Food Basket’ (THFB) came to R3 261 a month. This was 11%, or R329, up, in y-o-y terms, and 2.4%, or R76, more in m-o-m terms. The THFB is composed of a nutritionally-balanced selection of 26 food items, from all the food groups, and is designed to feed a family of two adults, one older and one younger child, for a month. In terms of affordability, assuming a family is earning two minimum wages and is receiving child grants and benefitting from school feeding, the THFB should take 31.1% of the family’s income. In June this year, the amount had been 30.4%.

“Our view is that food inflation is close to peaking – if the July figures were not at the peak already,” observed the BFAP. There were, however, issues of concern, such as whether or not the current ban of cattle transport within South Africa (to try and prevent the spread of food-and-mouth disease) would be extended beyond its initial three-week period. Should the ban be extended, the supply of beef would be constrained, driving up prices.