Moderate food price inflation on the cards

As winter cereal planting gets under way, early indications are that SA is on track for moderate food price inflation and strong agricultural exports.

As winter cereal planting gets under way, early indications are that SA is on track for moderate food-price inflation and strong agricultural exports.

The relief provided to consumers recently through falling food prices has been put at risk by the drought in the Western Cape, a weakening rand, rising fuel costs and the prospect of a global trade war. But analysts said consumers and farmers had reasons to be optimistic.

In March, SA recorded the lowest inflation rate since February 2011 at 3.8%, mostly due to lower prices of food, though this is expected to be at the bottom of the current cycle.

May is the start of the winter planting season, with indications that Western Cape farmers were betting on the forecasts of improved rainfall, said Wandile Sihlobo, an agricultural economist and head of agribusiness research at the Agricultural Business Chamber.

Early indications were that wheat planting would increase 2% in 2018, driven largely by increased planting in other provinces. Maize planting was expected to rise 5%, and canola 7%, said Sihlobo.

Maize production in 2018 was expected to be about 12.8million tonnes. Although that was less than in 2017, SA still had significant overstocks from that year’s record harvest. The higher maize price had put pressure on Western Cape livestock producers who had to pay more for animal feed as trucks transporting maize from inland were returning empty from the coast.

Because of this, farmers in that province were likely to shift to feed crops such as canola and barley, at the expense of wheat, said Absa AgriBusiness economists. SA is a net importer of wheat, with a bumper crop expected globally, and expectations that the US would increase cattle slaughtering was reason to be optimistic about meat prices, said Sihlobo.

Local yellow maize prices have come off their yearly low, but remain subdued relative to previous years. On Friday the yellow maize contract price rose 1.1% to R2,199 a tonne, having climbed 13.7% in 2018.

Maize prices picked up slightly in March, when China slapped a 25% tariff on US maize and soybeans, a retaliatory measure after the US imposed new steel and aluminium tariffs.