Thursday, 29 June 2023
By: Carien Kruger
Demand for vegetables has increased, as it often does when consumers are under financial pressure. However, higher demand means higher prices.
Food inflation slowed to 11.8% in May, but a category where it remained high was vegetables, which were 20.8% more expensive than a year earlier.
Annual price increases for certain vegetables were out of line with the change in supply volumes, the Bureau for Food and Agricultural Policy (BFAP) says in its monthly analysis of food inflation.
Products that were significantly more expensive in May than a year earlier included:
- Onions, which were 165% more expensive at municipal markets, while the volume was only 6% lower.
- Potatoes, which were 36% more expensive, while the volume was only 21% lower.
- Tomatoes, which were 19% more expensive, while the volume was only 3% lower.
- Cabbages, which was 27% more expensive, even though the volume was 5% higher.
The price increases reflect strong demand, according to the BFAP report. “This often happens in an environment where consumers’ purchasing power is limited due to the relative affordability of vegetables compared to fruits.
“The fact that cabbage prices have increased despite higher volumes is further evidence of the robust demand for products that offer better value for money.”
Although the weighting of fruits (1%) and vegetables (4%) is relatively low in the basket used to measure consumer inflation, the BFAP says the inclusion of fresh produce in diets is important, so trends related to this are relevant.
Fruit prices
Because fruits are seasonal, conclusions should not be based on month-to-month figures because supply can vary if harvesting occurs earlier or later, the bureau says.
“Prices (for fruits) remain stable, and on the local market they are even lower on an annual basis due to high production volumes driven by incentives that have fuelled expansion of plantations, especially over the past decade.”
Other food types
Apart from vegetables, producer prices for other products are showing a declining trend, the bureau says. “These declines are beginning to reach retail markets for some products and are likely to persist throughout the value chain in the coming months.”
However, load shedding and the related costs of alternative energy sources may partially counteract these declines at the retail level.
Input costs
“The good news for producers is that the cost of agricultural production inputs continued its downward trend from December 2022 levels in May 2023, despite a weaker rand. Average fertiliser costs decreased by 4% on a monthly basis,” says the BFAP.
The cost of diesel also continued to decline in May. These reductions will influence producers’ future planting decisions as well as prospects for product supply in the upcoming season.
“While food inflation remains high, the May 2023 figures represent a sharp decline from recent months and the first solid indication of a turnaround.
“The momentum is expected to continue over the coming months, with food inflation expected to trend downward, reflecting the pressure on consumer budgets, the high base effect, the relative recovery in the value of the rand over the past month, and the recent lower producer prices filtering through to the retail level.”
The BFAP says the relative strength of the rand remains an important factor. Local and international high-risk environments can cause sharp movements, and a quick depreciation will cause food prices to rise again.
