Meat prices are coming down in South Africa – but there’s a catch

 ·5 Jul 2023

Food price inflation remains very high in South Africa – but the Bureau for Food and Agricultural Policy’s (BFAP’s) latest data shows that pricing pressure on meat is starting to ease.

The BFAP’s latest food inflation brief shows that inflation is easing for different kinds of meat in South Africa, despite marginally higher international prices.

However, the easing of inflation isn’t due to lower production prices, generally, but more because of lower demand, as South African households come under pressure and can no longer afford their typical meat purchases.

“Given that the weaker rand would further increase the cost of imported products, the slowdown in meat inflation in South Africa reflects the extent of pressure on consumer’s spending power, as interest rates continue to rise, economic growth remains slow, and load-shedding continues to constrain economic activity,” said BFAP.

Meat prices were recorded 0.4% lower in May than in April, while year-on-year inflation eased to just over 7%, the group said.

International poultry prices were higher in May for the fourth consecutive month amid firm import demand from Asia and persistent supply concerns as Avian Influenza continues to spread.

Despite continued high cattle slaughters in Australia, bovine meat prices rose in May, stemming from higher global demand for supplies from Brazil and tightened supplies from the US. 3

Mutton/lamb and pork recorded year-on-year deflation, with prices lower than a year ago.

Recent data released by the South African Reserve Bank (SARB) has indicated a significant slowdown in disposable income growth during the first quarter of the year. Personal disposable income (PDI) only grew by 0.2%, a decline from 0.6% in the previous quarter.

As a result, seasonally adjusted nominal household debt increased at a faster rate than income in Q1, causing the household debt-to-income ratio to rise from 61.6% to 62.1%.

Consumer confidence, measured through FNB/BER Index (CCI), dropped even further to -25 index points during the second quarter of 2023, highlighting just how cash-strapped consumers are. According to FNB, sustained load shedding and high food inflation are primary concerns to low- and middle-income households.

These pessimistic households are now being forced to reconsider buying habits in light of excess financial pressure.

BFAP’s report provides an overview of food inflation dynamics, its associated causes and the cost of basic healthy eating. From an international perspective, when looking at the group’s Food Price Index (FPI), based on the prices of an international basket of food goods, there is deflation across many products.

It said that deflation was observed for oils (-48.2%), cereals (-25.3%), dairy (-17.7%) and meat (-4.1%) as international supply prospects improved. Despite these movements bringing relief to consumers’ wallets, other goods saw extremely high price inflation, such as sugar, which was up 30.9%.

For meat, lower feed prices are expected to provide relief for producers and ultimately should pass onto retail markets in the form of more affordable prices.

BFAP said that while food inflation remains high, numbers from May show a sharp decline and an indication of a turnaround.

“This momentum is expected to persist over the coming months, with food inflation expected to continue trending downwards, reflecting strain on consumer budgets, high base effects, the relative recovery in the value of the rand over the past month and the filtering through of recent lower producer prices to the retail level,” said BFAP.

“The relative strength of the Rand remains a key factor to watch, as the high-risk environment, both domestically and globally, could trigger sharp movements that affect price levels. Another sharp depreciating cycle will again drive food prices higher,” it added.

The table below shows that inflationary change across categories:

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