Retailers under fire for food price rises
Retailers have been “unjustifiably” escalating the prices of staple foods such as sunflower oil, white and brown bread, while “opportunistic” price increases for maize meal have been applied from 2021 to 2022, the Competition Commission reports.
This comes just days after consumer price inflation rose higher than expected in February, partly reflecting rising costs associated with load-shedding and basic foodstuffs, dealing a blow to hard-pressed consumers and businesses.
The eighth volume of the Essential Food Pricing Monitoring (EFPM) report, which now includes a special focus on the feed-to-poultry value chain, investigated the price of a range of essential food products including bread, cooking oils, maize meal, rice, flour, margarine and pasta at the retail and wholesale levels.
‘MAY NOT BE JUSTIFIED’
The latest instalment said that the retail price increments of 20% for white bread and 19% for brown bread in the year to December 2022, were higher than increases in producer prices that were at 15% and 14%, respectively, “implying that shelf price increases may not be justified by costs,” the commission said in a statement.
Moreover, the 32% price rise of maize meal far outpaced the South African Futures Exchange (SAFEX) price of white maize in the period, resulting in the price of maize charged by farmers being a lower proportion of the retail price of maize meal over the year. “This is concerning and may indicate opportunistic behaviour throughout the value chain and raises questions about the use of export parity pricing throughout the maize value chain,” it said.
STAPLE PRODUCT
The latest edition had a special focus on the feed-to-poultry value chain, specifically individually quick-frozen (IQF) chicken products, which are the most widely consumed chicken products in SA.
It highlighted that price increases for the staple product
took a proportionally greater amount from those with lower incomes with the poorest 10% of households devoting up to 7% of their total spending on chicken products, compared with the 1% spent by the wealthiest 10% of households.
The report exposed that feed prices during the period of investigation increased faster than the producer price of IQF products.
But despite this cost pressure, producers reported improvements in their financial performance, driven largely by high feed prices, which account for more than two-thirds of broiler production costs and are therefore a source of upward cost and pricing pressure throughout the poultry value chain.
Though the local poultry sector enjoys high levels of trade protection, including antidumping tariffs and import quotas meant to insulate the local industry from unfair trade competition, the report said that imports do play a role in constraining local prices.
Warning of a high concentration in the feed-to-poultry value chain, the report said that five firms make up 70% of total chicken production, and the top two firms make up 50% of the market.
The commission’s report said prices of five fruits and vegetables - cabbage, carrots, potatoes, onion and tomatoes - were generally volatile over 2022.
To assess if there are features in these markets that impede competition, an in-depth value chain analysis will be conducted through the recently launched Fresh Produce Market Inquiry.
THIS IS CONCERNING AND MAY INDICATE OPPORTUNISTIC BEHAVIOUR THROUGHOUT THE VALUE CHAIN