Food inflation will eat into consumers' wallets

The price of maize is set to rise this year, with a corresponding increase in food costs across most categories. Image: Global Giving

And South Africa's economists do not have good news for cash-strapped consumers. The weak rand means consumers will feel the pinch in their trolleys in the months ahead.

"Food prices are traditionally higher in December because we eat a lot at that time," said Professor Nick Vink, chairman of the agricultural economics department at Stellenbosch University.

He said food prices usually dropped in the new year. But a drought in the maize-producing areas and a soft rand means food costs could rise.

Head of Absa Agribusiness Ernst Janovsky said: "I expect food inflation to increase between 10% and 12% in 2014 because of the weakness in the exchange rate," he said.

"I tend to agree with him," said economist Mike Schussler. "Every time we've had a weak rand, food prices have gone up."

The prices of foods such as maize and wheat are set internationally and as the rand weakens, costs increase in South Africa.

Schussler said the petrol price, expected to rise by 30c a litre next month, would add to the cost of food. "There is no railway next to Shoprite. For the last few kilometres food always travels by truck," Schussler said.

A drought in the north-western parts of the country has led to farmers planting less maize in recent months and this could result in a higher mielie meal prices later in the year according to Macquarie Securities economist Elna Moolman.

She said that while maize is the staple diet of millions of South Africans it is also widely used in animal feeds. "As the price of maize goes up so does the price of meat, poultry, milk and eggs," she said.

Moolman said that red meat prices, which have been stable for the past two years, will also go up this year because farmers need to build up their herds.

Source: The Times via I-Net Bridge