Food prices likely to be affected by carbon tax

Food prices are likely to be affected should fuel prices remain unstable in the wake of a new carbon tax and various international economic trends, according to the farming lobby group AgriSA’s head of economics and trade centre of excellence, Nicol Jansen.

Yesterday, the Automobile Association released a statement predicting a mixed picture for fuel prices in June. The body cited recent unaudited month-end data released by the Central Energy Fund, which blamed variable international oil prices and an unpredictable rand/US dollar exchange rate.

There was an average drop of 19 cents a litre in May, although the basic diesel price increased by 2c/l.

According to the data, diesel users could expect an increase of about 14c/l in June, while illuminating paraffin looks set to rise by 9c/l. Jansen said AgriSA was concerned about the effect of a possible increase in fuel prices, but noted that while this could increase input costs for farmers, they could not directly pass this burden on to consumers.

He warned, however, that the trickle-down effect of a general increase in fuel prices could be passed on to consumers at retail level due to increased transportation costs.

Prices for products in the agricultural sector were determined by product prices on the international market and those changed due to international trends, like currencies, which meant direct input costs could not be absorbed. But further down the value chain, where the product was packaged and transported to retailers, the hikes were likely to influence the consumer price.

Other factors which may affect food prices included the domino effect of the trade war between China and the US. While this could sometimes create opportunities for other countries, the uncertainty it created could result in less predictable price trends.

Any number of current issues could impact the fuel price in the second half of the year, the AA noted, but it advised against relying on fuel price stability in the short to medium term.

“We suspect there may be more economic storms ahead,” it said.

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