SA food price rises in 2024 likely to moderate for most products

28 Jan 2024

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 severely disrupted. Domestically, the agricultural production conditions are promising.

Food prices were a significant discussion point worldwide in 2023. South Africa had a fair share of elevated food prices in the first half of the year, and the pace of increases slowed somewhat towards the end of the year.

The December 2023 consumer food inflation data showed further deceleration to 8.5% in December 2023, 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 and fats, and vegetables.

At the Agricultural Business Chamber of South Africa (Agbiz), we expect this moderation path to continue in 2024 for most of the products within the food basket.

Poultry

The significant risk to meat supplies that animal diseases such as avian influenza presented in 2023 could ease this year. There will likely be a recovery in poultry production following a range of interventions that the industry and the government embarked on at the end of 2023.

These include the importation of fertilised eggs to rebuild the parental bird stock lost from avian influenza, importing table eggs (powder and liquid eggs that would help in the baking process and free the whole eggs for human consumption), and the ongoing processes of the possible vaccinations to curb the spread of the disease (although there remain some delays with approvals of some vaccines by the authorities). Evidently, over the festive season, we did not notice any recorded shortages of poultry products.

Another 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 over the foreseeable future.

Fruit and vegetables

Moreover, the fruit and vegetable prices, which remained elevated towards the end of 2023, will likely slow notably in the coming months because of the estimated increase in the volume of products that are in season in the various fresh produce markets across South Africa.

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.

Notably, while 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. This week, 30 January, South Africa’s Crop Estimates Committee will release the preliminary planting data to show whether farmers planted the area they intended to plant.

At the Agbiz, we are optimistic that farmers planted this area. Moreover, crop yields will likely be broadly excellent with favourable rainfall across the country since the season started. What is vital is for farmers to receive ideal rain in February, a pollination period that is key to yield development.

Good omens

This potentially improved domestic agricultural supplies and a generally sizeable global harvest bodes well for continuously moderating consumer food price inflation in 2024.

At the international level, the figures from the Food and Agriculture Organization of the United Nations 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. DM

Wandile Sihlobo is chief economist at the Agricultural Business Chamber of SA and author of A Country of Two Agricultures.

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