Food price warning for retailers in South Africa

The Competition Commission of South Africa has issued a strong warning to retailers regarding the pricing of essential food items, emphasising the need for greater vigilance and fairness as food prices continue to be a concern for many households.

Despite recent positive signs of slowing inflation, the Commission is concerned that food prices remain high and are not decreasing as rapidly as they should in response to reduced cost pressures.

The latest Essential Food Price Monitoring (EFPM) report outlines these concerns and highlights several specific food items that have drawn attention due to potential price discrepancies along the value chain.

The food items at the centre of this issue include maize meal, bread (both brown and white), sunflower oil, eggs, individually quick-frozen (IQF) chicken, and canned pilchards.

These items are staples for many South African households, especially lower-income families, making any price increases particularly impactful on food security.

The Commission has been closely monitoring the farm-to-retail price spreads for these products, looking for signs of unjustified price increases or what is known as “rocket and feather” pricing.

This term describes a phenomenon where prices quickly rise when costs increase but fall slowly when costs decline, allowing retailers to maintain wider profit margins at the expense of consumers.

One of the key areas of concern is the price of sunflower oil.

According to the EFPM report, the price of sunflower seeds—used to produce the oil—has increased due to the effects of a mid-summer drought.

However, the producer price of sunflower oil has remained stable, yet the retail prices have not dropped in line with this trend.

The Commission noted that the spread between producer and retail prices for sunflower oil has widened, raising questions about whether retailers are passing on savings to consumers as they should.

The report also noted that these pricing patterns are a holdover from the Ukraine war’s impact on global oilseed markets, which initially drove prices up but are now being exploited for profit by processors and retailers.

Similarly, the price of maize meal, another staple, has been rising due to the recent drought’s impact on maize production.

The farm-to-producer spread for maize meal fell dramatically earlier in 2024, indicating that costs had been pushed up the value chain.

Although the retail price has also increased, it has not risen as steeply, causing the spread between producer and retail prices to narrow.

The EFPM report suggests that while consumers are feeling the effects of price increases, they are still somewhat shielded from the full impact compared to previous spikes.

Egg prices, affected by the avian flu outbreak in 2023, have remained elevated due to supply constraints.

The outbreak resulted in the culling of millions of chickens, significantly impacting the local poultry market.

While producer prices for eggs fell slightly from their peak in early 2024, retail prices have not followed suit, leading to a widening price spread, which suggests that consumers continue to pay more than necessary.

In addition to sunflower oil, maize meal, and eggs, the report also highlighted bread as another essential food item with concerning price trends.

Despite falling wheat prices since late 2023, the price of brown bread has continued to increase, with producers appearing to expand their margins by keeping prices higher than warranted by their input costs.

This practice raises concerns, particularly for low-income households that rely on bread as a primary food source.

The Competition Commission has reiterated that while overall inflation may be easing, food prices have not adjusted quickly enough to benefit consumers.

The Commission said that it will continue monitoring these price trends and ensuring that unjustified price increases are addressed.

Retailers have been warned that if these pricing patterns persist, they could face investigations and potential sanctions to protect consumers from undue financial pressure at a time when affordability is paramount.

Read: 4 of South Africa’s biggest employers in serious trouble