Non-profit organisation, the Bureau for Food and Agricultural Policy (BFAP), has released its latest outlook focusing on agricultural production, consumption, prices and trade in South Africa.
The baseline takes into account the latest trends, policies and market information, and is constructed in such a way that the decision maker can form a picture of equilibrium in agricultural markets given the assumptions made.
However BFAP noted that markets are extremely volatile and the probability that future prices will not match baseline projections is therefore high.
Given this uncertainty, the baseline projections should be interpreted as one possible scenario that could unfold, where temporary factors (e.g. weather issues) play out over the short run and permanent factors (e.g. biofuels policies) cause structural shifts in agricultural commodity markets over the long run, it said.
In April 2018, the cost of the BFAP thrifty basket amounted to R751 for an adult male and R2,738 for a family of four per month.
Applying BFAP retail price and inflation forecasts, the average cost of the BFAP thrifty basket for 2018 is estimated at R2,786 for a family of four (0.8% higher than the average basket cost of January to April 2018 and 2.7% higher than the average basket cost in 2017).
The projected cost of the BFAP thrifty balanced food basket in 2019, for a family of four, is R2,928 per month (5.1% higher than the projected 2018 value).
To be able to afford the thrifty basket in April 2018, a four member household required a monthly income of about R7,823 (if 35% of total expenditure is allocated to food).
Effectively this means that 54% of the SA population aged 15 years and older can’t afford the BFAP thrifty balanced food basket, unless they drastically reduce spending on non-food items, BFAP said.
Current food prices
After a wave of severe drought-induced food inflation South African consumers found some relief on the back of a rebound in crop production, with food inflation losing pace since the beginning of 2017, the BFAP said.
“The sustained positive aggregate food inflation was, however supported by dynamics in the meat sector,” it said.
“Red meat specifically, although showing initial signs of recovery, is still experiencing the effects of the 2015/16 drought, further supported by relatively weak exchange rate levels, which in turn maintained attractive export opportunities.
In the first quarter of 2018, average meat prices were still exhibiting double digit inflation.
“There is however a general consensus amongst analysts and industry experts that food inflation has bottomed out (at 3.5% in March 2018) and will begin an upward cycle supported by, inter alia, an array of tax factors that took effect on 1 April 2018.”
These include a 1% increase in VAT and a substantial increase in the fuel levy, the BFAP said.
Over the last few years, BFAP has developed a range of ‘balanced food basket’ options for low-income consumers in South Africa, to facilitate the measurement of food affordability from an ‘ideal’ balanced diet perspective.
The BFAP balanced food baskets are not necessarily a reflection of consumers’ food intake reality, but rather an indication of what it will cost to consume a basic healthy eating plan.
The BFAP Balanced Food Basket includes the following 29 food items:
- Starch-rich staple foods: Maize meal, brown bread, white bread, rice, potatoes and wheat flour;
- Animal protein foods: Beef mince, chicken pieces, canned pilchards, eggs, polony and beef sausage;
- Vegetables: Tomatoes, onions, carrots, cabbage and pumpkin;
- Fruit: Apples, bananas and oranges;
- Dairy: Full cream milk, sour milk / maas and cheddar cheese;
- Fats & oils: Sunflower oil, margarine and peanut butter;
- Sugary foods: White sugar
- Legumes: Dried beans and baked beans in tomato sauce.
“In reality, consumer food expenditure is more complex than 29 food items and will include additional items not considered, which will represent an additional expense to these figures.
“Furthermore, consumers could also switch between food items adding further complexity to the analysis of food affordability,” the BFAP said.
The food affordability analysis focuses on two types of households: A single male, and a family of four consisting of an adult male, an adult female and two children.