According to the World Wide Fund for Nature (WWF), South Africa is food secure at a national level. However, there is a high prevalence of micronutrient deficiencies at household level in both urban and rural areas, especially among children. These deficiencies can be attributed to socio-economic factors.
According to the Food and Agriculture Organization (FAO) of the United Nations, future food prices depend on the way in which production systems can accommodate tightening resource constraints. Climate change also affects agricultural expansion and could hamper the growth necessary to meet growing demand. Ultimately, these factors could push food prices upward.
The local state of affairs
According to Wandile Sihlobo, chief economist of the Agricultural Business Chamber (Agbiz), South Africa’s food prices increased at a somewhat slower pace during January this year compared to December 2019. The country’s food price inflation peaked at 3,7% year-on-year (y/y) in January compared to December 2019, which was 3,8% y/y. However, the deceleration of food price inflation pertained only to bread, cereals, vegetables and fish. On the downside, the prices of meat, eggs, milk, cheese, fats, oil, fruit, sugar and sweets increased.
According to Agbiz, developments in the grains and meat markets will have the biggest impact on food price inflation. South Africa is a nett importer of wheat, which is expected to climb to 764 million tons or 4% y/y. This could result in pressurised grain-related product prices in the coming months. South African maize production is also set to increase by 11% y/y to approximately 12,5 million tons.
Meat price inflation took a downward turn in 2019, which was largely influenced by the ban on red meat exports due to the foot-and-mouth disease (FMD) outbreak. Unfortunately, 2020 started on the same note following another FMD outbreak. This will most likely result in subdued meat prices, which means that meat will not suppress the overall food price inflation in 2020, compared to the previous year. According to Agbiz, South Africa’s food price inflation will climb to 4% in 2020 from 3,1% y/y in 2019.
International food price trends
The FAO food price index rose for the fourth consecutive month in January this year with an 11,3% increase compared to January 2019. The increase is largely caused by the price strength of vegetable oils, sugar, cereals and dairy products.
International prices of all major cereals increased in January, with wheat prices experiencing the biggest price increase. Export prices of maize also increased in January, reflecting good trade activity and the tightening of seasonal supply in southern hemisphere exporting countries. International rice prices also saw an increase due to harvest pressures and the effect of climate on exporters’ output.
The international prices of soya bean and sunflower oil kept rising in January this year as high global import demand coincided with an undersupply of available exports. However, due to uncertainties regarding the implications of the trade deal between the United States and China, and concerns following the coronavirus outbreak, prices across the vegetable oil complex began to decline from mid-January.
The prices for butter, skim milk powder and cheese increased in January this year, reflecting a strong import demand. However, meat prices dropped primarily due to pressure caused by reduced purchases.
In January the FAO sugar price index went up by 5,5% from December 2019; this was largely propelled by a 66% decrease in production in Brazil’s largest sugar production area and a 25% contraction in Mexico’s sugar harvest.
Domestic market outlook
According to the Bureau for Food and Agricultural Policy (BFAP), the next decade will bring on a slight contraction in the Western Cape wheat area, which will even out to 300 000ha by 2028. The contraction will most likely be caused by the expansion of canola and barley, which will increase to approximately 110 000ha and 125 000ha, respectively, by 2028. The Free State wheat area is expected to expand to approximately 110 000ha by 2028.
Competition from alternative crops in irrigated regions are predicted to prevent significant expansion of wheat and barley areas.The total area of canola is expanding and is also projected to see the fastest yield growth. This is largely caused by the increased availability of higher-yielding cultivars, which are more resistant to pest and climate constraints. Improvements of 0,5tons/ha per year from 2016 to 2018 will most likely amount to 1,85tons/ha come 2028. – Claudi Nortjé, FarmBiz
For more information or references, send an email to the author at firstname.lastname@example.org.