Scorching heat raises SA food inflation risk

Dryer and hotter-than-usual weather across South Africa’s main summer crop growing regions is hurting the outlook for the key maize harvest and raising risks for higher foodprice inflation, according to a farm-industry group.

“The major risks to consumer food inflation in South Africa in 2024 will primarily be white maize products,” Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa, said. “We see upside risks in maize prices and grain products in the consumer food inflation basket.”

The South African central bank is closely watching food prices as it assesses if it can safely start lowering interest rates later this year. It has repeatedly flagged the risk that El Niño-induced weather patterns may have on inflation.

The central bank’s models show severe drought conditions caused by the climate phenomenon could add 3-8 percentage points to headline inflation.

While farmers have managed to expand planting areas relative to the previous season, yields are expected to be poor and suffer from heat damage and lack of rainfall, Sihlobo said.

SA consumes most of the maize it produces and exports surpluses mainly to neighbouring countries. In its most recent forecast released at the end of February, the Crop Estimates Committee saw harvests for white and yellow maize falling 17.2% and 7.7% respectively in the 2023-24 season. Overall maize production is estimated to come in at 14.3 million tons.

Second 2023-24 production forecasts for summer crops are scheduled for release on 26 March and will likely indicate worsening conditions for maize, he said.

SA’s annual inflation rate rose for the first time in three months in January to 5.3% from 5.1% in the prior month.

Food inflation, which has been the biggest contributor to the headline number, slowed to 7% from 8.5% in December. –