Food inflation decelerated to 5.2% year-on-year last month, from 5.3% year-on-year in October 2017. This is according to Wandile Sihlobo, Agbiz Head of Agribusiness Research.

Sihlobo said most food products price inflation within the basket continued to slow, reflecting the recent good harvest of grains and oilseeds. “Moreover, meat price inflation, which has been somewhat stickier in the past few months, also decelerated due to an uptick in livestock slaughtering activity,” Sihlobo added.

“Amongst products on the upside; milk, eggs and cheese price inflation increased by one percentage point from the previous month. This is partially on the back of the damage caused by the Avian Influenza in the poultry industry”.

The early season production data suggest that South Africa could again have a decent harvest in the 2017/18 production season, which means agricultural commodity prices could remain at relatively lower levels for some time. This bodes well for food price inflation for the coming months, particularly for products such as bread, cereals, sugar and meat, amongst others.

According to Sihlobo, the meat price inflation slowed to 14.9% y/y in November, from 15.5% y/y in October 2017. This comes after cattle slaughtering activity increased by 3% month-on-month to 219 393 animals in October 2017. “This trend is expected to prevail throughout the festive season due to the anticipation of increased demand for meat,” he explained.

“As we set out in our previous note on 22 November 2017, avian influenza, which has been spreading across the country, has largely affected egg-layers. Data from the South African Poultry Association shows that approximately 4.8 million birds have been culled or died due to the spread of avian influenza. Of that, egg layers constituted 91%. Therefore, it is not surprising that egg price inflation accelerated in November 2017,” Sihlobo said.

Above all, South Africans can expect food price inflation to remain at relatively lower levels for some time due to a promising production season and an expected increase in livestock slaughtering on the back of a festive season demand.

A recent report from the Australian Bureau of Meteorology confirmed a development of La Niña in the 2017/18 summer period. This essentially means that countries such as South Africa could receive above normal rainfall between December 2017 and February 2018, which bodes well for crops. The USDA forecasts South Africa’s 2017/18 maize production at 12.5 million tonnes, above annual consumption of 10.5 million tonnes.

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