Food prices stabilising, but still threaten food security

Food prices are stabilising, with food inflation at 5.1% in March, the lowest rate since September 2020, but food prices are still increasing at a rate which may be a threat to food security. In addition, cost pressures stemming from load shedding and transport have not abated and the impact of drought conditions is likely to add to pressures throughout the value chain.

According to the latest edition of the Essential Food Pricing Monitoring (EFPM) Report released by the Competition Commission on Monday, there are indications that spreads across food value chains are beginning to settle following periods of intense volatility covered in previous editions of the report, despite ongoing load shedding, the deteriorating rail and port situation and sporadic disturbances in global shipping markets following the conflict in the Red Sea.

The Commission continued to monitor the price of essential food items identified by the public, sunflower oil, brown bread, eggs, individually quick frozen chicken and maize meal.

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Eggs become affordable again

The research found that the 2023 avian flu outbreak caused major disruptions in the poultry industry after it was first detected in the Western Cape in April 2023. A total of 8.5 million broilers and layer chickens were culled between April and November 2023.

The outbreak slowed down around October and November and the consequence of lower supply for consumers was a substantial 66% increase in the price of eggs from April 2023 through November 2023. Nine million fertilised eggs, 945 000 day-old chicks, 62 metric tons of egg products and 30 986 metric tons of poultry meat were imported to supplement demand and rebuild the lost flock.

The supply of eggs has since shown signs of recovery on the supermarket shelves since December 2023.

Sunflower oil price stabilises

The research found a substantial decrease in the producer price of sunflower oil from R24.19 to R21. The decrease in sunflower oil prices was attributed to an abundance of its stock on the international market.

The United States accelerated harvest progress suggests that sunflower oil production was ahead of schedule. This early harvest contributed to the surplus of sunflower oil stocks, further driving prices down. Favourable weather conditions in major sunflower-producing regions like Brazil, Ukraine and the United States of America, resulted in a healthy harvest.

Brown bread price becomes steady

For brown bread there has been a long-term pattern of narrower margins in bread production according to the research. The farm-to-producer spread for brown bread increased steadily over the course of 2023 as wheat prices fell while average producer prices rose.

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Chicken becomes affordable again

The research showed that the retail spread of the price of chicken has been decreasing from 52% in January 2021 to 36% in November 2023. Avian flu had a major impact on the price of eggs and affected the poultry price and government allowed 30 986 metric tons of poultry meat imports as a safety measure to stabilise the supply of chicken during the HPAI outbreak.

For maize meal, the research found that there is considerable variation in farm-to-producer spread and there have been several instances when the spread was above a typical range, but from March until July 2023 maize primary input cost (white maize) decreased by 27,32% with a farm value of a 2,5kg bag going from R19,81 to R14,40.

However, at the same time, the producer price for maize meal did not decrease to the same extent resulting in wider-than-normal spreads from April to August.

The report also took a deep dive into pilchards as a source of protein for people who have to watch their spending. While chicken is still South Africa’s favourite protein source, canned pilchards have gained renewed popularity as consumers adjust their food expenditure in response to the rising cost of living and the effects of load-shedding on their ability to store perishable foods.

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Pilchards become an option with high food prices

According to the report this renewed popularity is reflected in the sales figures of the listed canned pilchard producers. Relative to other proteins, canned pilchards are not the most affordable source of protein with each gram of protein costing R1.12 in December 2023.

The most affordable protein is dry beans (R0.32 per protein gram) followed by eggs (R0.48 per protein gram) and individually quick frozen chicken (R0.91 per protein gram). Beef is the most expensive source of protein (R2.81 per protein gram).

Therefore, the increase in the popularity of canned pilchards appears to be based on a combination and not only its price or relative ranking as a protein source.

The researchers observed that:

• Canned pilchards are sold in smaller quantities (typically 400g cans and smaller) which gives consumers some flexibility regarding their purchasing patterns
• Pilchards are also easy to store as the cans are easy to stack and do not need refrigeration
• Another consumer benefit is that pilchards are available in various flavours to accommodate consumer tastes without additional expenditure on flavour-enhancing ingredients
• Canned pilchards are zero-rated for value-added tax (VAT), which may help them remain more affordable.

According to the researchers these features suggest that pilchards will continue to be important in the food baskets of low-income consumers and may act as an important buffer when there are shocks in the supply of the other more popular protein sources.

Within this context, consumer decisions to swap items in their basket for other foods, such as chicken for canned pilchards, are likely to continue and remain an important feature of grocery shopping in the coming months, the researchers say in the report.

“While the price of canned pilchards has increased, our analysis shows that canned pilchards producers have absorbed some of the cost increases that they have experienced. This is likely to have benefitted consumers as they increase their consumption of pilchards over other protein sources.”