Concerns raised over “unjustified” food price increases

by Joanie Bergh

South African consumers have been subjected to unjustified price increases for sunflower oil, white and brown bread, maize meal, and poultry products, according to a report by the Competition Commission

The Commission’s August 2022 analysis points to a sharp price increase for sunflower oil across the value chain.

It also investigates the prices of a range of essential products (bread, cooking oil, maize meal, rice, flour, margarine, and pasta) on a retail and wholesale level. According to a press release, the Commission also started an investigation into fresh product markets to determine whether there are characteristics in these markets that hinder competition. 

The report, which includes the monitoring of essential food prices in 2021 and 2022, focuses on the difference in the price of food items at the farm gate as opposed to the price it is sold at in stores. 

Findings in the report

  • Between January 2022 and December 2022 white and brown bread retail prices (20% and 19% respectively) rose quicker than producer prices (15% for white bread and 14% for brown bread). It implies that shelf price increases (between R15,47 and R18,62 for white bread and R13,99 and R16,61 for brown bread) are not justified by the costs.
  • The price of maizemeal rose by 32% from R26,62 to R35,29 between January 2022 and December 2022 for a 2,5kg bag while the South African futures exchange price for white maize rose at a slower pace. This led to farmers’ share in the maize prize being a smaller part of the retail price of maizemeal for the year. The Commission views this as opportunistic behaviour across the value chain that also raises questions about the use of export parity prices in the maize value chain.
  • The price of fruits and vegetables was generally volatile during 2022 and a thorough value chain analysis will be conducted.
  • Poultry value chain:
    • The price of cereals and oilseeds used to produce livestock feed – wheat, corn, soybeans, and sunflower oil – was volatile and increased during 2021 and 2022.
    • During the same period the price of poultry feed was relatively stable.
    • It is predicted that raw material costs may fall over the first half of 2023. The Commission will monitor the extent to which these reductions will be transferred to feed and chicken prices on a retail level.  
    • Feed prices rose quicker than the producer price of individually frozen pieces, which are the chicken products most consumed in South Africa.
    • When the import of chicken meat from the European Union was banned in response to the bird flu outbreak, domestic producer prices rose. This deviation also requires further investigation, and the Commission will keep an eye on developments in the poultry sector.

“The food sector remains a priority for the commission as poor consumers spend a significant portion of their income on essential food items. As food inflation remains elevated and load shedding continues to affect business operations, food price monitoring will remain a priority for the commission, given its importance to the welfare of South Africans,” says Sipho Ngwema, Head of Communication.

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