Food prices bite poor the hardest

Annual food price inflation stood at 8,7% between April 2011 and April 2012, while headline inflation increased by 6,1% over the same period.

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Although food inflation has slowed from 10,3% in February 2012, it still exceeds the Reserve Bank’s 6% inflation target.  “The most concerning point is food inflation for the poor,” said Prof André Jooste, senior manager at the Market and Economic Research Centre of the National Agricultural Marketing Council (NAMC). “While food inflation is generally 8,7%, it is much higher for the poor.”

The cost of the basic food basket increased by 13,4% or R51,72 to R438 from April 2011 to April 2012, compared to 14,3% in the comparative period of January, according to the NAMC’s May 2012 Food Price Monitor (FPM). For the poorest 30% of the population, the food basket consumed 38,7% of monthly income in April 2012, up from 34,1% in April 2011. For the wealthiest 30% of the population, the same food basket comprised only 3,1% of monthly income, up from 2,7% the year before.

Food inflation for April was largely driven by month-on-month increases in fruit (4,1%), vegetables (1,3%), fish (0,9%), and milk, eggs and cheese (0,7%). However, decreases were seen in sugar, sweets and desserts (0,9%), cold beverages (0,9%), meat (0,6%), oils and fats (0,5%), other food (0,5%), bread and cereals (0,4%) and hot beverages (0,4%).  The annual increase in retail prices of beef cuts ranged from 6,2% for beef rump steak to 12,13% for beef mince. Lamb showed an annual price increase of 9,53% at retail level.

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The retail price of fresh and frozen whole chicken increased annually by 10,11% and 9,46% respectively. However, demand for meat has declined sharply. “Carcass prices declined by about 12% and feedlots are incurring losses as feed, costs remain high. This has resulted in a 30% drop in weaner prices over the past few weeks. Consumers are under increasing pressure with higher administered prices, especially fuel and electricity,” the FPM stated.

Stanlib chief economist Kevin Lings said food inflation, which peaked in December 2011 at 11,6%, seemed to be moderating. “However, in the last few weeks we have seen an uptick in international food prices and locally crop estimates have been revised downwards. In general there is less food inflation pressure, but it is coming off a high base,” he said. ‘‘We still think food inflation will ease to 7% by the end of 2012.

“Other costs, mainly petrol and transport, play a role in food inflation. I don’t think farmers will be too unhappy because crops could be reasonable and prices are still firm.”