Members of the Agricultural Economics Association of SA write that with various product prices rising rapidly across the globe as the world opens up after months of lockdown, food prices have been in the headlines and SA is no exception.
As a case in point, consumer food price inflation averaged 6.6% over the past 10 months, compared with 4.5% in 2020. For a society like SA, where food constitutes a significant share of spending for poor households, a rise in prices is always concerning. The authors point out that it is critical to understand if the recent increases are temporary or could persist. In that context, they look in detail into the products that have been at the core of the rise in SA food basket prices over the past year. Meat, grains and vegetable oils have been the major drivers. They expect that many of the fundamental factors that underpinned meat price trends, both in the global and local markets, will persist into 2022, but their effect on further price growth could moderate. For grains and oilseeds, the authors say that most of the factors that resulted in rapid price growth will persist over the medium term. Further broad-based factors that contributed to inflation across most of the subcategories in the food inflation basket included delays and high costs in global shipping, rapid increases in local electricity costs combined with inefficient electricity distribution, and rising fuel costs. Locally, load-shedding and infrastructure issues have, in turn, affected manufacturing and distribution costs, which resulted in significant cost pressures in local supply chains. The authors’ view is that these challenges will continue to factor into inflation in 2022. They draw the following conclusion: “We look to 2022 with a sense of caution that consumer food prices could remain elevated. While the pace of price increases might soften, households could remain under pressure for a while as the world and local supply chains adjust.”
- Read the full original of the opinion piece in the above regard by Tracy Davids, Marlene Louw, Wandile Sihlobo and Melissa Van Der Merwe at BusinessLive
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