National Agricultural Marketing Council – NAMC Publications

The Consumer Price Index (CPI) in February 2010 indicates that food inflation fell below the lower limit of the South African Reserve Bank’s target inflation bracket. The period of high inflation is over for most countries. South Africa’s food inflation is higher than that of most developed countries.

Food commodity prices continued to decrease at a double digit rate. The prices of food remain higher in the rural areas than in the urban areas. In January 2009, people living in rural areas had to pay R9.75 more than people in urban areas for food products monitored by the NAMC. The cost of the food basket expressed as a share of the average monthly income of the poorest 30% of the population increased slightly from 33.2% in

January 2009 to 33.4% in January 2010 while the cost of the food basket expressed as a share of the average monthly income of the wealthiest 30% of the population remained constant at 2.6% over the same period.

The consumer Price Index (CPI) report released by Statistics South Africa (Stats SA) in November 2009 confirms that food inflation is currently within the South African Reserve Bank’s target inflation brackets. The year-on-year (i.e. October 2008 to October 2009) increase in the CPI for food and non alcoholic beverages, as reported by Stats SA, was 5.3 %.

Across the world food inflation slowed over the last number of months. South Africa’s food inflation compares favourably with that of other African countries, but is still higher than in most developed countries.

The Consumer Price Index report released by Statistics South Africa (Stats SA) confirms that a period of high food inflation is definitely on the decline. The year-on-year (i.e. July 2008 to July 2009) increase in the Consumer Price Index for food and non alcoholic beverages, as reported by Stats SA, was 8.3 %, which is 1.9 percentage points lower than the figure released in June 2009 (10.7 %). Food and non alcoholic beverages inflation nevertheless remains one of the significant drivers of overall inflation in South Africa.

Across the world food inflation slowed over the last number of months. South Africa’s food inflation compares favourably with that of other African countries, but is still higher than in most developed countries. Prices of the most important grain commodities declined significantly compared to mid-2007. Apart from sunflower oil prices that also declined, bread and maize meal prices are still sticky. With the drop in wheat prices to date one would expect bread prices to have come down by now. The increase in meat and dairy prices year-on-year supported prices at retail level. The rate of increase however slowed considerably. Vegetables prices remain strong. People living in rural areas had to pay R8.03 more than people in urban areas to buy a selected basket of food items in July 2008. The price difference increased to R16.50 in April 2009. In July 2009 the price difference increased to R16.72. From July 2008 to July 2009 the cost of a basic food basket increased by R45 (14%) to R374 in nominal terms. The cost of a basic food basket remained relatively constant from January 2009 to July 2009.

The cost of the food basket expressed as a share of the average monthly income of the poorest 30% of the population increased from 29% in July 2008 to 33% in July 2009 while the cost of the food basket expressed as a share of the average monthly income of the wealthiest 30% of the population only increased slightly from 2.3% to 2.6% over the same period.

NAMC reports that the Consumer Price Index (CPI) for food and non-alcoholic beverages showed an increase of 13.7% year-on-year (i.e. April 2008 to April 2009). However, food inflation data present encouraging figures that show food prices are softening. In rural areas consumers pay R16.50 more than consumers in urban areas to buy the same basket of selected products in April 2009. In contrast to most demand categories in the South African economy, the demand for food has remained strong and as the impact of the recession filters through the economy, the demand for fresh produce and more basic food items is expected to remain high.

February 2009 marks the release of the new CPI index which indicates a new Headline Inflation measure. The new base period is set to 2008 in contrast to the previous base period of 2000. The February 2009 Food Price Monitor (FPM) reports a year-on-year increase in the CPI for Food between January 2008 and January 2009. People living in rural areas had to pay R5.42 more for a 5kg bag of maize meal than people in the urban areas in January 2009. A pilot study conducted by the NAMC in the Limpopo Province identified four major reasons for this difference between urban and rural food prices. Global commodity trends indicate a decrease in the international maize and wheat prices during January 2008 and January 2009. Various conclusions regarding the cost of transport are indicated in this report, especially concerning road transport. A poor economic growth outlook further hinders improvement in commodity prices.

One of the major drivers of overall inflation in South Africa is food inflation. The overall CPI reflects a year-on-year (i.e. October 2007 to October 2008) increase of 12.1%. Even though food price increases have slowed both locally and globally during this period, South Africa experienced a higher rate of both overall and food inflation compared to most other countries around the world over the last year. All food items sold in the rural areas experienced over 6% inflation between October 2007 and October 2008. Consumers paid R1.55 more than consumers in urban areas for the products monitored by the NAMC in October 2008 compared to October 2007. Due to a decline in international commodity prices the domestic market should experience similar trends in commodity prices over the next three-month period.

The fourth publication of the South Africa Food Cost Review provides a specific overview of trends in food price inflation and food prices at retail level during 2007. This publication serves as a useful tool for the state to monitor food price trends, food processing costs and farm-to-retail price spreads. Current factors that have an effect on the agricultural sector (directly or indirectly) are also reported in this issue and include factors such as domestic economic developments, consumer dynamics, climate change, the oil market, biofuels, transport, input costs and agricultural trade. Findings on the causes of agflation are also shown in this publication.

The NAMC released a document on the most recent trend in various selected input prices. Input prices are considered one of the most constraining factors for many industry’s competitiveness. Being informed on the trend will allow agribusinesses to manage their costs better

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The Story of Potatoes reports on broad trends in input costs for table potatoes with detailed graphs and findings. The contribution of different variable input costs to total production cost of table potatoes and trends in individual input cost items are also covered in this issue, published in March 2009.

NAMC published a detailed report in October 2008 on broad trends in input costs for fruit, especially the deciduous fruit industry. This report, the Story of Fruit, investigates broad trends in input cost movements for the fruit industry, the contribution of different variable input costs to the total variable input cost of deciduous fruit and trends in individual input cost items.

The NAMC’s published a report in July 2008 namely the Story of Wheat and Maize which contains information on broad trends in input costs for grains. Although these trends relate specifically to the maize and wheat industry, it is also applicable to other grains. Issues that are covered in this report are broad trends in input cost movements for the grain industry, the contribution of different variable input costs to total variable input cost of maize and wheat and trends in individual input cost items.