Consumers face food price rises

The local maize price was 44.4% higher in the first seven months of the year compared with last year.

According to the latest producer price index, grain prices were 15.9% higher in June than a year ago. Stats SA figures show food inflation, which contributes almost 16% to the total consumer inflation basket, was 5.9% in June.

Analysts warned food inflation could rise up to 18%. Ernst Janovsky, head of Absa Agribusiness, said this week that rising grain-based food prices would lead to lower livestock production.

He said food inflation would rise to 12%-15% in eight months.

Mike Schüssler, economist at Economists.co.za, said at the launch of food-price research on Friday that food inflation could rise to 12%-18%. The proposed merger between two of SA's biggest grain seed players and rising electricity, labour, fuel and fertiliser costs would raise foodproduction costs, affecting meat, eggs and dairy prices, he said.

Grant Thornton's food and beverage report this week showed food producers had increasingly to pass price rises on to consumers. Its latest International Business Report said privately held food and beverages businesses absorbed a large share of price rises until recently, but could not keep doing so.

Ivan Scott, managing partner of Grant Thornton Cape, said food and beverage retailers were not as badly affected by recession as those in some developed economies where consumer spending was weak and basic food prices had been rising.

"Producers in SA benefited from low prices of basic food items thanks to strong agricultural supply and could afford to keep prices intact and the consumer relatively happy," Scott said.

But this was changing due to rising food prices at producer level and slower growth in consumption.

Source: Business Times