The minor increase in the global food price index in April may not be cause for alarm for now, according to Thabile Nkunjana, an agricultural economist for Agro-Food Chains in the markets and economic research division of the National Agricultural Marketing Council (Namc).
The FAO Food Price Index (FFPI) released on Friday averaged 127.2 points in April, up 0.8 points (0.6%) from March and standing at 31.2 points (19.7%) below its value in the corresponding month last year.
The slight rebound in the FFPI in April was led by a steep increase in the sugar price index, along with an upturn in the meat price index, while the cereals, dairy and vegetable oil price indices continued to drop.
Nkunjana said for South African consumers, the recent slight increase in global prices might not be as impactful because local prices remained high due to global developments and challenges unique to South Africa.
For instance, local prices remained high because producers were still getting rid of the higher costs incurred during the period.
“This can take up to five months. As well as the effect that load shedding may have, especially for processed food products,” Nkunjana said.
He said the minor increase in the global food price index in April might not be cause for alarm for now, but if it continued to grow in the coming month or so, it could delay the expected decline in local prices from the second half of this year, which would be a disappointment given the pressure local consumers were feeling.
Nkunjana said the sharp increase in the sugar price index (17.6%), which hit its highest level since late 2011, was what led to the rise in the global food price index in April.
in the past few months there was a noticeable increase in sugar prices.
“This increase is primarily attributable to tighter global supplies in the 2022-2023 marketing season as a result of a further downwards revision to the production forecasts for China and India.
“The Indian government earlier was reported to be supporting a national ethanol blending programme which would negatively impact sugar production. India is a large global producer and exporter of sugar. These changes could, in the short to medium term, limit the amount of sugar cane available for production sugar, which would have a negative impact on supply and, ultimately, the pricing for most of 2023,” he said.
Thailand, an important player in the global sugar industry, was also reported to have a lower than expected sugar output and Brazil, which is anticipated to have a large crop this season, saw a slower start than anticipated in harvesting.
The meat price index increased by 1.3%, further pushing the pressure exerted by sugar prices on the global food price index. While the price of grains and oilseeds has supported feed prices in recent times, the high cost of feed remains a factor on animal products like meat.
“In addition, there is a limited supply of meat in general due to disease outbreaks that continue to affect the livestock industry, and demand increase from Asia to a larger extent was key to the observed rise in global meat prices,” Nkunjana said.
The price indices for cereals, dairy products, and vegetable oils decreased again, which should keep commodity prices from rising and ultimately harming consumers further, he said.
Benay Sager, chairperson of the National Debt Counsellors’ Association, said South Africa’s inflation was driven mostly by what was happening with regulated prices, particularly petrol, electricity, municipal rates, among others.
“We did see in last month’s records that food inflation was 14% compared to the year before, and I think consumers are definitely feeling this. What happens in the international market is what this FAO Food Price Index indicates, and how much of that gets reflected in South African prices is a bit complex.
“Not all of the movements may feed into our local market, but I think the main thing is that inflation unfortunately continues to be high in South Africa. It’s really hurting consumers’ pockets, but it’s driven mainly by other things that are regulated,” Sager said.
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