Inflation drops as food prices stabilise

Consumer and producer prices are moving downward. As reported by Statistics South Africa (Stats SA), the year-on-year increase in the Consumer Price Index (CPI) for food for January 2008 to January 2009 was 16,1%, 1% lower than the figure released in December 2008.
Food inflation contributed 2,4% to overall inflation, and was identified as the main driver of overall inflation, which rose 8,1% since last year. Overall inflation was 2,1% higher than the 6% upper limit set by the South African Reserve Bank, but 1,4% lower than the 9,5% recorded for December 2008.
Prof Johann Kirsten, a council member for the National Agricultural Marketing Council (NAMC), attributed high consumer and producer prices to the aftermath of global recession and low food supplies. He feels prices peaked in January 2008 and will only move down over the next few months.
This trend can already be seen in the international market. Changes in local markets might not be as drastic. They might take longer to affect consumer prices than producer prices, because of the compounding effect in the supply chain.
The cycle of high-food prices could be prolonged by current economic conditions and limited agricultural potential in the Southern African Development Community (SADC), combined with socio-economic problems in Zimbabwe, warns a recently released NAMC report.
It’s unlikely maize prices in South Africa will move as low as export parity in the current season, mainly because of sharp increases in white maize consumption in the human market.
Lower animal-feed prices will bring welcome relief in the feedlot industry, while livestock commodity prices are expected to remain firm over the outlook period for January 2009 to January 2010, a result of public holidays and the positive impact of lower interest rates and fuel prices.
With lower input costs and a positive supply response a correction in vegetable prices of 78,54% since January can also be expected, but might be marginal in the short term. – Glenneis Erasmus