Food Price Inflation To Remain Subdued

4 November 2020 – THE AGRICULTURAL Business Chamber said yesterday it expected food price inflation to remain subdued for the rest of this year, although rising grain prices presented an upside risk.

Agbiz chief economist Wandile Sihlobo said the organisation estimated that food price inflation could average about 4.5 percent year on year in 2020, compared with their initial expectations of 4 percent, up from 3.1 percent last year.

“In the first eight months of the year, food price inflation has averaged around 4.4 percent, and food-producer price inflation consistently showed an uptick in August and September,” said Sihlobo.

“South Africa’s food price inflation will remain reasonably contained into 2021, possibly not exceeding 5 percent, as we expect good agricultural production on the back of a La Niña weather event to contain grain prices, particularly from end of February 2021, while supporting all sub-sectors of the agricultural sector.”

Food price inflation slowed to 4.2 percent in September from 4.3 percent the previous month. Agbiz said this was primarily on the back of a deceleration in the prices of oils and fats, and fruit and vegetable products, which overshadowed the uptick in the prices of products such as meat and fish, milk, eggs and cheese, and sugar, sweets and desserts.

According to Agbiz, high-frequency data about South Africa’s 2020/21 summer and winter crop season continued to paint a positive outlook.

The recently released data from the Crop Estimates Committee (CEC) on intentions to plant showed that farmers intended to increase the area plantings for summer crops by 5 percent to 4.15 million hectares.

“This comprises yellow and white maize, sunflower seed, soyabeans, ground nuts and dry beans.

“There is an expected increase in area plantings of most of these crops, except for sunflower seed, where the area plantings are anticipated to decline by 4 percent to 480 500 hectares, which would be the smallest area in nine years. This likely decline in sunflower seed planting is mainly on the expected shift in some hectares to white maize, in part, due to attractive prices,” Sihlobo wrote in Agbiz’s weekly viewpoint.

Some summer crop growing regions had started to receive summer rains and could continue to see good precipitation into February next year. This was also the period where the South African Weather Service anticipated there would be above-normal rainfall as part of the expected La Niña weather event.

Sihlobo said that near-term weather forecasts corroborated these expectations, with the next two weeks set to bring higher rainfall over the summer crop growing regions of the country.

The CEC lifted wheat, barley, canola and oats planting by 5 percent, 1 percent, 9 percent and 6 percent, respectively, from September to 2.13 million tons, 526 706 tons, 137 356 tons and 47 400 tons.

These would be the largest harvests on record for barley, canola and oats, while the wheat harvest would be the largest in 19 years. Source (Business Report)