Farmers to benefit from CPIX reshuffle

SA’s consumer price inflation basket (CPIX) is being reshuffled with new weights coming into effect from 2009.
Issue date : 18 July 2008

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SA’s consumer price inflation basket (CPIX) is being reshuffled with new weights coming into effect from 2009. Experts say this could ease the interest burden on indebted farmers.weighting of food is expected to drop from 26,6% to 17,86% in the basket, while transport’s weighting will increase from 12,98% to 17,79%. “relies on the for inflation figures, adjusting the repo interest rate accordingly,” explained Prof André Jooste, a senior manager at the National Agricultural Marketing Council (NAMC).

“Lower inflation figures would relieve some pressure for further interest rate hikes.” “The new weighting will definitely bias the CPIX downwards; we might see lower official inflation rates next year,” said Christelle Grobler, an economist at the independent Bureau for Economic Research. “It’s an improvement and might better reflect the consumption patterns of households.” Dr John Purchase, CEO of the Agricultural Business Chamber, said, “Lower inflation means less pressure on interest rates. As 70% to 80% of farming production capital is borrowed, this would be good for agriculture.”

However, he does not foresee any drastic change in the CPIX figures as the adjustments are relatively small. According to Statistics SA, a 2005/06 income and expenditure survey indicated transport is the fastest growing spending category for SA households, while food spending has decreased as a percentage of household income, mainly due to an increase in wealth since 2000. Food and fuel inflation are currently at 17% year on year. This is one of the main drivers of SA’s 10,9% inflation rate as measured in May.

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 Reserve Bank has a mandate to keep inflation in a band of between 3% and 6% in order to remain competitive in relation to major trading partners. But, food inflation is largely determined by factors outside consumers’ control. P rof Jooste explained that these include rising food demand from China and India, the emerging black middle class in South Africa, the effect of the biofuel industry on food production, changing consumer patterns, rising input costs linked to the oil price, climatic change impacting negatively on production and the exchange rate influencing imports and exports. – Wouter Kriel

Cape Town’s flower show cancelled

The e Cape Town Flower and Garden Show will not take place this year due to a lack of funding. he show, which had its inception in 2003, is intended to entertain and inspire a love of gardening, and to provide a platform celebrating and showcasing the rich floral diversity of the Cape and Southern Africa. am Bowling, an events director, said the organisers had thought it would be easy to secure a new sponsor, to fill the gap left by South African Airways’ three-year sponsorship, after the success of last year’s event held at Lourensford Wine Estate in Somerset West. he organisers, however, despite approaching various financial institutions, were unable to secure a title sponsor that would provide sufficient funds to uphold the high standards to which the event aspires. B owling claims this is a result of the current economic climate. However, the Cape Town Flower Show company and host Lourensford Wine Estate remain committed to the event and will continue to work to ensure its ongoing future success. The organisers are working towards securing support for the 2009 event. – Glenneis Erasmus

Tractors sales up despite expensive fuel and credit

While the rest of the economy feels the pinch of high interest rates and escalating fuel costs, agricultural equipment sales are still riding a wave of excellent maize harvests and good producer prices. June tractor sales of 525 units were almost 30% up on the 409 units sold in June last year. Year-to-date tractor sales are almost 55% higher than last year. Combine harvester sales of 39 units in June were three times what they were in June last year, reflecting the equipment requirements of harvesting the current, excellent maize crop. Baler sales are still quite buoyant, almost 50% up on a year-to-date basis.

Sentiment on the market remains positive. However, some farmers, when looking ahead to the forthcoming summer crop, will look carefully at input costs before deciding what to plant at the end of the year. he late summer/autumn rains have enabled some farmers to bring forward their primary tillage operations and this too is stimulating equipment sales. Demand for agricultural equipment is likely to remain good in the third quarter of this year. Thereafter, sales will depend on the weather and planting prospects for the summer crop in the fourth quarter. – Staff reporter