Banele Ginidza

The Competition Commission has offered a glimmer of hope with its latest Essential Food Price Monitoring (EFPM) report, saying that although lower food inflation indicated some respite in consumer costs, the relentless rise in food prices posed a significant threat to food security.

This has raised questions about the economic stability of many South Africans.

The commission's report released on Thursday highlighted various cost pressures that are still plaguing producers and consumers alike.

Ongoing loadshedding, persistently high transportation costs, and the lingering effects of drought conditions are all poised to compound the challenges facing South Africa’s food chain.

As producers attempt to cushion consumers against these harsh realities, the fluid grocery market remains marked by significant consumer behaviour shifts. The EFPM report noted that many shoppers were swapping out costly items for more affordable protein sources, such as choosing canned pilchards over chicken.

Competition Commission economists, Khalirendwe Ranenyeni and Kagiso Zwane elaborated on the findings, indicating that while price spreads across food value chains appeared to be stabilising after a period of volatility, consumers still perceived current prices as high, exacerbated by months of elevated inflation.

"While the price of canned pilchards has increased, our analysis shows that canned pilchards producers have absorbed some of the cost increases that they have experienced. This is likely to have benefitted consumers as they increase their consumption of pilchards over other protein sources," they said.

The current harvest season is still influenced by constraints from the previous year, predicting that stocks will conclude at one million tonnes lower than last season.

However, analysts are cautiously optimistic as they anticipate a fruitful upcoming crop, which may stabilise both supply and demand, particularly in the maize sector, where geopolitical factors are also critical due to South Africa’s status as a major maize producer and exporter.

Ranenyeni said since the monitoring of prices, there had been improvements in producers and retailers timeously adjusting prices, a difference from past practice where the benefit in commodity price reduction were not passed to the consumer as quickly.

"The reason we started this was because of factors called feathers and rockets," Ranenyeni said.

"It is because once there is an increase in commodity prices, what we saw recently in maize prices shooting up by 60%, you would have observed processors and retailers quickly increased the prices for consumers in September and October, and they came down in January. Observations in the past were that they were not quickly reducing the price."

The EFPM report showcased the ongoing recovery in various product chains.

Despite the efforts to absorb price pressures, consumers are reminded that egg prices, affected by the avian flu outbreak of late 2023, remain high, with a current retail price of R24.81 against a producer price of R13.76 for half a dozen.

The anticipated recovery of poultry flocks is set for mid-2025, creating a prolonged period of inflated prices as the industry undergoes recovery.

Additionally, the report revealed a tangible reduction in producer price spreads for cooking oil, dropping from 27% to 23%, and notable steadiness in the prices of frozen chicken, which remains resilient amidst moderate retailer pricing behaviours, exhibiting less than a 38% spread between production and retail.

Brown bread continues to exhibit slow pricing adjustments, trailing behind the farm value of wheat, which sits at R3.26 against a production price of R14.24.

Amidst fluctuating conditions, the value chain in maize meal faces challenges following adverse weather, with upward pricing trends persisting throughout 2024.

However, with producer prices remaining stable and not fully reflecting the rising costs of white maize, the spread has shrunk, highlighting a more consistent retail price environment.

While the commission’s report signals improvements in price management across the food supply chain, South Africa grapples with a fragile food security landscape. As consumers navigate rising expenses, the enduring effects of inflation on household budgets remain a bitter pill to swallow.

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