Food and non-alcoholic beverages inflation marginally ticked up to 3.9% in April 2018, from 3.5% in the previous month (March). The uptick was largely on non-alcoholic beverages, particularly soft drinks, on the back of the introduction of the sugar tax in April 2018. Food products within the basket generally softened due to relatively lower agricultural commodity prices, which in turn, were the reflection of large supplies. Worth noting is a deceleration in meat price inflation which is partly underpinned by fairly lower pork prices, as well as an increase in monthly cattle slaughtering activity.

The overall non-alcoholic beverages inflation was at 5.3% in April from 2.5% in the previous month (March). Within this category, the uptick was largely on cold beverages, which accelerated to 6.1% in April from 2.1% in the previous month. Hot beverages ticked up to 3.8% from 3.3% in March 2018. This shows that the overall uptick in the non-alcoholic beverages category was partly driven by the sugar tax since this is the biggest monthly jump this year, coinciding with the implementation of the tax on 1 April 2018.

One of the products that are in deflation within the food basket is bread and cereals, falling 3.7% year-on-year (y/y) in April 2018. This is likely to be the key theme over the next couple of months due to expectations of large maize supplies of 16.4 million tons this year, well above South Africa’s annual consumption of 10.7 million tons.

Meat price inflation slowed to 9.0% y/y in April 2018, from 10.0% y/y in the previous month. This downward trend could be sustained as cattle slaughtering activity is expected to gain momentum. The United States Department of Agriculture suggests that the number of cattle to be slaughtered in 2018 could increase by 4.0% from the previous year to 3.5 million head following a general recovery in the industry performance.

While the introduction of new taxes presents upward pressures, the relatively large domestic grain and global sugar supplies, combined with the expected increase in cattle slaughtering activity could still contain food inflation at fairly lower levels in the coming months. – Agbiz press release