Why SA needs a food pricing inquiry

During the last four months, as the coronavirus disease (COVID-19) pandemic swept across the globe causing many countries to impose lockdowns that dictated trade and movement restrictions, many news articles and images were circulated showing farmers destroying produce, from milk to potatoes, that they were unable to sell. At the same time, there were reports of shortages and price increases of certain produce on supermarket shelves. These price increases were not just a perception, as the latest Food Price Monitor published by the National Agricultural Marketing Council (NAMC) showed. The estimated nominal cost of the NAMC’s 28-item urban food basket amounted to R908,62 for April 2020, compared with R895,18 for March, resulting in a monthly percentage increase of 1,5% and a year-on-year increase of 3,3%. Amongst the products that experienced a high increase in price (classified by NAMC as those products that experienced price increases of 6% or more) was potatoes, which, if you have been following some news headlines, just didn’t make sense. Shortly after the start of South Africa’s national lockdown in March, potato producers started reporting a sharp decline in demand because of the complete shutdown of the restaurant, fast food and hospitality industries. The increase in potato prices can also not be ascribed to a drop in supply on farm level.

In addition, farmers are not enjoying higher prices for their potatoes. In fact, according to Potatoes South Africa ( see page 23), demand for potatoes fell sharply during April and May, which resulted in significant downward pressure on prices to the point where the average price for all classes on all markets were below break-even point for producers.

The same scenario played out for other produce and was experienced by individual farmers and consumers. I experienced this when I went to the supermarket one day during the lockdown to buy some groceries, but I couldn’t find any lettuce. The next day I received a WhatsApp message and photos from a farmer who was ploughing his crop of lettuce back into the ground because the price being offered at the fresh produce market was too low to justify harvesting the crop.

Farmer’s Weekly (19 & 26 June) recently published an article that discussed the fresh produce pricing structure in South Africa. In this article, Dr Theo De Jager, president of the Southern African Agri Initiative, said: “COVID-19 has shown us that there is something wrong with the distribution of risk and profit. There is no justification for the pricing structure. The cost of getting the product from the farm to the shelf cannot be that high.”

Disruptions to supply chains caused by the lockdown can probably be blamed for some of the retail shortages and price disparities experienced during this period. But the seeming disconnect between producer and retail prices for fresh produce is not new, and more questions must be asked around fairness for farmers, traders, retailers and consumers, in the food value and supply chains. Something must be broken when a system produces millions of tons of waste, while giving farmers too little to make ends meet, and offering consumers prices that they cannot afford.