Get ready for a food price shock in 2016
BusinessTech.co.za - Jan 19th 2016, 09:40
Ongoing drought conditions and a weak currency are hammering South Africa’s food producers, who are under pressure to keep prices low.
According to a report by Bloomberg, food companies may be forced to sacrifice profits in 2016 to preserve market share.
However, the price of food is still expected to shoot up by 10% by the middle of the year, increasing 25% by April 2017.
The price of white corn has doubled over the past month, and the price of wheat has risen by 25%, Bloomberg said.
Higher food prices will have a massive negative impact on the poor who spend a bigger portion of their total income on food products.
According to data from the South Africa Institute of Race Relations, poor households spend a third (33.5%) of their income on food, compared to wealthier households that spend over a tenth (10.8%).
Overall, South Africans spend about a quarter (25.3%) of their total income on food.
In 2015, South Africa experienced its driest year in over a century, with a paltry 403mm of rain falling in the country.
These drought conditions, along with problematic economic policies and international market conditions in January caused a 30% slump in the rand, which has exacerbated the country’s food issues.
According to Bloomberg, food companies have admitted that 2016 will be a tough year, but plans have been made to diversify enough to reduce the cost of manufacturing food and preserving profits.From 2016 Copyright, BusinessTech. All right reserved.
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