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GAME INDUSTRY TRENDS ANALYSIS 2024
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Relief As Inflation Dips, But Food Production Challenges Persist
Relief as inflation dips, but food production challenges persist
By Octavia Avesca Spandiel | 20 September 2024 | 5:10 pm
South Africa’s agriculture sector may see some relief as the Consumer Price Index (CPI) eased to 4,4% in August, its lowest level since April 2021. This dip, down from 4,6% in July, was driven by lower transport and housing costs, with energy and fuel prices being key contributors.
According to Dawie Maree, the energy sector, particularly fuel, played a big role in driving inflation down. Photo: FW Archive
However, despite the good news on inflation, the agriculture sector continues to face significant challenges, particularly in food production.
Dawie Maree, head of agriculture information and marketing at FNB, told Farmer’s Weekly that the decline in inflation was largely attributed to a broad-based easing, especially in energy prices.
“The energy sector, particularly fuel, played a big role in driving inflation down. For agriculture this is good news, as lower fuel costs are essential for farmers heading into the planting season,” Maree said.
Fuel prices are a major input cost in agriculture, affecting everything from ploughing fields to transporting goods. Farmers, especially those planting summer grains like maize, sunflowers and soya beans, expect the anticipated fuel price decrease in October to further reduce their operational costs.
“Lower fuel costs ahead of the planting season will help farmers stay competitive, especially in a market where input costs are consistently rising,” Maree said.
Food inflation pressures remain
Despite the overall dip in inflation, food prices have been a persistent source of pressure. August saw food inflation rise slightly from 4,5% to 4,7%, driven by climatic challenges that have impacted vegetable and grain production.
Maree said adverse weather, particularly black frost, affected the potato and tomato industries, pushing up vegetable prices. Additionally, the ongoing drought caused by El Niño has taken a toll on grain production.
“We’ve seen our summer crop output from 16 million tons to 13,3 million tons due to drought conditions, and that’s contributing to the increase in food prices,” he said.
This is a significant concern for grain farmers, whose reduced yields translate into lower income and potentially higher food costs for consumers. The agriculture sector will be watching closely to see how these factors impact food inflation in the coming months, with hopes that prices will moderate as weather conditions improve.
While Maree expects some volatility in the vegetable sector, he remains cautiously optimistic about food price stabilisation, stating that food inflation could moderate towards the end of the year. However, he warns that climate and market unpredictability could continue to disrupt price stability.
According to the CPI, most product groups experienced higher annual inflation rates, particularly in bread and cereals, meat, fish, and dairy. Bread and cereals inflation has increased for three consecutive months, with significant price hikes for rice (up 17,3%), pizza and pies (up 10,9%), and hot breakfast cereals (up 7,9%). The monthly increase in this category was 0,4%, with notable rises in grain-based products, including bread flour (up 2,1%), brown bread (up 1,3%), and white bread (up 1,2%).
While the meat index rose on an annual basis, prices dipped by 0,4% between July and August. Several chicken and beef products saw price reductions, with fresh whole chicken down 2,2%, sausage down 1,7%, chicken giblets down 1,3%, and beef mince down 1,3%. However, prices for bacon, beef extract, corned beef, fresh chicken portions, ham, and biltong increased.
Poultry sector’s gradual recovery expected to ease egg prices
In the poultry sector, the effects of 2023’s avian influenza (AI) outbreaks are still being felt. Abongile Balarane, CEO of the South African Poultry Association’s Egg Organisation, told Farmer’s Weekly that the AI outbreaks, which peaked around this time last year, had devastating effects on the egg-laying flock.
“We lost about 30% of our national flock due to the AI outbreaks in 2023, with the worst impact in Gauteng, Mpumalanga, KwaZulu-Natal, and the Western Cape,” Balarane said.
With production down from 27 million to fewer than 20 million chickens, the supply of eggs was severely constrained, pushing prices higher.
The recovery has been slow, as it takes roughly 17 months for imported fertile eggs to hatch and for chickens to reach egg-laying maturity. Balarane estimates that the poultry industry will only return to full production capacity by the second half of 2025.
“We’re seeing new birds enter production, but the recovery process is gradual. Egg prices should start to ease as more chickens reach the point of laying,” he said.
However, restocking efforts have been hampered by the fact that many farmers who culled their flocks due to AI have not been compensated by the government. This financial strain has slowed the recovery process, leaving many poultry producers struggling to rebuild.
Balarane also mentioned the importance of biosecurity and AI vaccines as long-term solutions to prevent future outbreaks.
“We’ve been negotiating with government to secure vaccines for avian flu, which, combined with tighter biosecurity measures, will help mitigate future risks. So far, we haven’t reported any new AI cases in 2024, but the virus could re-emerge,” he said.
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