Food inflation ends 8-month decline, rising 4.1% year-on-year in August

19 Sep 2024

The latest update on South Africa’s consumer price inflation showed a further slowdown to 4.4% year-on-year in August 2024, which is a 40-month low and now back below the Sarb’s target midpoint of 4.5%. Monthly pressures from food and electricity saw headline inflation edging up marginally by 0.1% month-to-month but still below the July gain of 0.4% month-to-month.

Source: Freepik

Food inflation trends

Food inflation however ended its 8-month deceleration, ticking 4.1% higher year-on-year in August 2024 and back at the June 2024 level. Except for the July 2024 outcome, food inflation remains at its lowest level in fifty months. Most of the food subcategories posted slight increases including “bread and cereals”, meat, fish, “milk, cheese and eggs”, “oils and fats”, and vegetables.

The magnitude of “bread and cereals” increases was surprisingly timid given the runaway grain prices due to the drought-induced harvest contraction in 2024.

On the back of a 21% year-on-year drop in the 2023/24 maize harvest to just 13.03 million tons coupled with a strong import demand for the white maize category from the southern Africa region, prices surged by 48% year-on-year to just over R5,350/t with the December 2024 futures already closer to R5,500/t in recent trades.

Monthly food inflation

Monthly food inflation rebounded marginally from -0.1% month-on-month to 0.2% month-on-month in August with most categories posting gains except for meat which declined by 0.4% month-on-month and “sugar, sweets and desserts” falling by 0.2% year-on-year.

Vegetable inflation posted the biggest percentage increase of 1ppts from the previous month at 4.4% y/y which reflects the black frost impact on big-ticket items such as potatoes and tomatoes that rose by 8.6% and 14.8% year-on-year, respectively.

This uptrend is likely to persist near term given the supply constraints of certain categories from Limpopo. Average potato prices to mid-September 2024 on major markets were already up by 21% m/m and 12% at R9.86/kg which is 44% and 58% higher than the year-to-September 2024 and the three-year averages, respectively. For tomatoes, prices rose by almost 30% month-on-month and 96% year-on-year to R12.54/kg during the same period.

Nonetheless, given the combination of the improved weather outlook with the La Nina weather pattern in the forecast for the 2024/25 agriculture, a strong global supply outlook, and a renewed stronger rand exchange rate, we can expect a moderation in prices across most commodities for the year ahead.