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South Africa’s food and non-alcoholic beverages inflation has bottomed out and will begin an upward cycle in the coming months, supported by an increase in agricultural commodities prices.
South Africa’s food and non-alcoholic beverages inflation has bottomed out and will begin an upward cycle in the coming months, supported by an increase in agricultural commodities prices.

SA food and non-alcoholic beverages inflation unchanged

ECONOMIC NEWS

By Wandile Sihlobo - Dec 20th 2018, 15:33

South Africa’s food and non-alcoholic beverages inflation has bottomed out and will begin an upward cycle in the coming months, supported by an increase in agricultural commodities prices. The headline number will probably increase marginally as we expect the uptick in cattle and sheep slaughtering activity to contain meat price inflation at fairly lower levels in the near term which will, in turn, influence the overall increase. 

South Africa’s food and non-alcoholic beverages inflation has bottomed out and will begin an upward cycle in the coming months, supported by an increase in agricultural commodities prices. The headline number will probably increase marginally as we expect the uptick in cattle and sheep slaughtering activity to contain meat price inflation at fairly lower levels in the near term which will, in turn, influence the overall increase.

Figures released this morning (12 December 2018) by Statistics South Africa show that food and non-alcoholic beverages inflation remained unchanged at 3.4% y/y in November 2018. But the products price inflation movements within the basket were mixed. Bread and cereals, fish, milk, eggs and cheese, oils and fats, vegetables, sugar, sweets and desserts, other foods and beverages increased from the previous month, while meat price inflation slowed.

The deceleration in meat price inflation was partly driven by an increase in slaughtering activity, specifically in the sheep and cattle subsectors. South African farmers slaughtered 220 534 head of cattle in October 2018, up by 13% from the previous month and a percentage point higher than the corresponding period last year. In addition, about 324 102 head of sheep were slaughtered, up by 3% from the previous month, but still 10% lower than October 2017.

In terms of grains and cereals, while South Africa still has a large supply for the 2018/19 marketing year, the unfavourable weather conditions in the western parts of the country has delayed planting activity in the white maize and sunflower seed areas, thus leading to an upswing in commodity prices. While not related to the figures released today, it is worth noting that SAFEX yellow and white maize prices were up by 33% y/y and 48% y/y on 11 December.

Having said that, data released by the USDA showed that South Africa’s 2018/19 maize harvest could amount to 12 million tons, down by 11% from the 2017/18 season. While it is still too early in the season to be certain about the 2018/19 maize production prospects, a harvest of 12 million tons would mean that South Africa would have sufficient supplies until April 2020. When the current marketing year ends in April 2019, South Africa could have approximately 3.3 million tons of maize inventories, which would mean that the country might have 15.3 million tons of supplies in the 2019/20 marketing year. This is well above the annual consumption of about 10.8 million tons.
AgriOrbit 

Read more about: inflation | food | beverages

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