Global food prices fell the most since 2008 after worries about grain and vegetable oil supplies eased as Ukraine moved to resume exports, Bloomberg reported.
The UN index of world food prices fell by almost 9% in July. The index fell to its lowest level since January, before Russia’s blockade of ports in Ukraine – a major food exporter – pushed food prices to a record, the report said.
The U.N. index fell for a fourth straight month, offering some relief to consumers facing a deepening cost-of-living crisis that spans everything from energy to transportation. Yet prices remain high, putting pressure on low-income households and exacerbating world hunger.
Food prices have already risen during the pandemic as logistics have caused problems and demand has outstripped supply as the economy recovers. But now the start of harvest in the northern hemisphere and fears of a looming recession are weighing on commodities.
For South Africa, the Household Affordability Index compiled by Pietermaritzburg Economic Justice and Dignity in July highlighted the rising cost of food in the country.
The data showed that the average cost of a household food basket, which contains 44 essential items, increased by 611.44 rand over the past year – 14.8% and well above the headline inflation rate (CPI) recorded at 7 in July. 4%.
The minimum food deficit for a family is nearly 43% after providing transportation and electricity, the lobby group noted. It said food is the fourth largest budget item after transport, electricity and debt service.
The group’s program co-ordinator, Mervyn Abrahams, told SABC news that transport costs are rising due to higher fuel prices, as well as electricity prices – up more than 9% in some areas – which have squeezed the food budget.
Abrahams said the rising cost of living is a burden not only on those living on the breadline, but also on middle-class South Africans.
This, he said, is due to increased costs of debt service, credit cards, bonds and car payments, as people have less money left over to spend on food.
“So we are seeing that food security is also starting to have a big impact on what we generally refer to in South Africa as the middle class.
“And it’s likely that if the current trajectory of interest rates continues into next year, that many households that are now in the middle class are likely to fall into the low income group.”
ANC President Cyril Ramaphosa told delegates at the political party’s policy conference last week that the government must respond “urgently and forcefully” to issues facing citizens every day, including food prices.
“We have also noted with great concern the impact of the rising cost of living on South African families and have made a number of recommendations regarding rising fuel and food prices. We called on the government to take urgent measures to support consumers and businesses at this difficult time,” he said.
It will be worse
Annabelle Bishop, chief economist at Investec Bank, noted in a note this week that consumer price inflation in South Africa had risen sharply from 5.9% y/y to 7.4% y/y, but was still below June’s US CPI inflation in 9.1%.
“The July figures are expected to put an end to the sharp rise in inflationary pressures in both areas,” she said.
CPI inflation in July is likely to remain high, with the US at around 9.0% y/y and South Africa at around 7.5% y/y, but not accelerating to the large jumps seen in second quarter, Bishop said.
Commodity-level food price inflation is also starting to moderate from previous months, which is likely to translate into more modest CPI inflation by the end of the third quarter, and therefore more modest CPI inflation in the fourth quarter. for South Africa, the economist said.
International prices for oil and petroleum products have fallen since mid-June, and another petrol price cut for South Africa is planned for September by about 3.00 rand per liter, following the cut announced in August, Bishop said.
“South Africa still expects CPI to move to 8.0% y/y in 3Q22 from 7.4% y/y in June, but at a slower rate of acceleration than in 2Q22, which while 4Q22 is likely to moderate to 7.0% y/y and during 1Q23 below 7.0% y/y.’
Read: South Africa’s massive food price hike – here’s what you’re paying more for