Food inflation – high meat prices worrying

Statistics SA (Stats SA) on Wednesday releases its Consumer Price Index (CPI) figures, which indicated that the annual consumer inflation eased to 4,9% in June after recording a 30-month high of 5,2% in May.

“The monthly increase in the consumer price index (CPI) was 0,2%, up from 0,1% in May but lower than the 0,5% rise recorded between May and June 2020.”

Between May and June, annual food and NAB inflation remained unchanged at 6,7%, with three food categories namely oils and fats, meat and sugar, sweets and desserts registering the highest annual increases.

Meat for one, sent jitters in the market and it is expected to accelerate reaching an annual rate of 8,6 from a 12-month low of 4,1% in August 2020 said Stats SA.

Shockingly, lamb prices increased by 10,9%, stewing beef by 16,7% and pork by 10,5% which placed doubt with meat market stakeholders that consumers will place resistance to buy meat at high prices Bureau for Food and Agriculture Policy (BFAP) insinuated.

According to senior agricultural economist at FNB, Paul Makhube, the increase was accelerated by international food prices which experienced declines except in the meat complex.

“In the meat complex, prices were up across all categories due to the combination of strong world demand led by Asia and China as well tight supplies from the US, Brazil, and the Oceania region. The FAO meat price index rose by 2.1% m/m and 15.6% y/y to 109.6 points in June 2021.”

BFAP added that in the case of meat prices, it was due to “tight supply and high input costs, which was further amplified in June due to a shipment of live sheep and cattle to the middle east.”

The past week unrests also added to the strain and disrupted trade across various value chains, which saw closure of major routes for the distribution of products and inputs into the agriculture sector.

BFAP expected food inflation to slow down in July as slow compared to the second quarter of 2021 “due to higher base effects that were apparent during the third quarter of 2020.”

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