Boost for meat prices in South Africa

 ·25 Apr 2024

Inflation for producers has seen an overall increase, but there are positive developments regarding meat inflation, with price increase fears subsiding.

According to Stats SA, headline producer price inflation (PPI) jumped from 4.5% year-on-year in February to 4.6% in March – slightly above the consensus expectations from Bloomberg.

PPI looks at inflation from the producer’s perspective before it hits consumers, with a decrease in PPI generally good news for CPI – which dropped from 5.6% in Feburary to 5.3% in March.

The main contributors to the headline PPI annual inflation rate were:

  • food products, beverages and tobacco products (increased by 4.4% year-on-year and contributed 1.3 percentage points);

  • coke, petroleum, chemical, rubber and plastic products (increased by 4.6% year-on-year and contributed 1.1 percentage points);

  • metals, machinery, equipment and computing equipment (increased by 5.5% year-on-year and contributed 0.8 of a percentage point)

The main contributors to the headline 0.1% PPI monthly increase were coke, petroleum, chemical, rubber and plastic products (increased by 2,5% month-on-month and contributed 0,6 of a percentage point)

Investec Economist Lara Hodes said that the R1.00 increase in petrol and diesel prices in March underpinned the increase.

Although the April increase was smaller, it will still add upward pressure on the upcoming reading.

Manufactured food inflation fell from 4.4% year-on-year to 3.6% in March.

A breakdown from the food basket shows that meat and products price inflation dropped from 4.2% to 2.7%.

According to Agbiz Chief Economist Wandile Sihlobo, supply constraints on poultry products due to the outbreak of avian influenza resulted in meat price inflation at the end of last year.

“But there is now anecdotal evidence that the restocking process is underway and there is improvement in the poultry products supplies. Therefore, the risks of further price increases have subsided somewhat,” said Sihlobo.

In addition, the other food products category (which includes bakery products, sugar and other food) saw prices fall from 7.6% to 6.6%. Sugar prices, in particular, fell from 14.8% previously to 9.5%.

Grain mill products, starches and starch products, and animal feeds fell by 3.8% year-on-year in March.

That said, Hodes said that there are still upside risks for the bread and cereal products in the food basket due to the potentially poor white maize harvest from the recent heatwave and dryness.

In the latest CPI data, bread and cereals registered a softer annual print of 5.0% compared to February’s 6,1% – well below the recent high of 21.8% in January 2023.

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