Global wealth and asset management company Anchor expects food inflation to rise moderately in the coming months, driven by uncertainty surrounding US policy direction and its potential effect on global markets and the rand.
Anchor noted that although the rand typically weakened during periods of global instability, “the National Treasury’s decision to scrap the proposed VAT increase has removed an immediate risk of added consumer pressure on non-zero-rated goods”.
“Additionally, the expected recovery in summer crop yields should help lower feed costs for livestock producers and ease prices of key staple foods. That said, ongoing outbreaks of animal diseases remain a key risk, particularly for meat and dairy supply and pricing.”
Business Day reported March headline consumer price index (CPI) inflation surprised on the downside coming in at 2.7% year on year — below market expectations.
“Food and nonalcoholic beverages inflation edged slightly lower to 2.7% year on year in March,” Anchor said, adding that elevated maize prices from late 2024 continued to feed through to cereal-based products.
“Second-round effects in meat prices were evident, but month-on-month gains have started to taper, suggesting a potential peak in pass-through effects. Price gains in fish, vegetables and fruit provided upward pressure, though overall food inflation remains relatively contained.”
Anchor said modest food price pressures were expected to persist through the second quarter of 2025, “as higher farmgate prices for key staples continue to trickle down to the retail level”.
The company noted that in April, the UN’ Food and Agriculture Organisation (FAO) reported a rise in its Global Food Price Index (FFPI) — a key measure of international food commodity prices —which averaged 128.3 points. This reflected a 1% increase from March’s reading of 127.1 points and a 7.6% rise compared to April 2024.
“Currency fluctuations have played a significant role in shaping global price trends, while recent adjustments in tariff policies have added to market uncertainty.”
On a more commodity-specific basis, global wheat and maize prices declined in April due to favourable weather conditions and improved crop prospects in key countries, Anchor said.
“For SA consumers, this is cautiously good news. The 2024 drought caused maize shortages, but the projected 14.7-million tonnes maize harvest for 2025 suggests domestic supply will be sufficient to meet the 12-million tonnes demand,” Anchor said.
According to the company, this supports stable pricing for maize-based staples such as maize meal.
Anchor does not expect sharp increases in retail maize meal prices. “Future prices have since stabilised, suggesting calmer markets ahead.”
Anchor noted that global meat prices posted a modest increase in April, driven by pork. Beef and lamb prices were supported by Easter-related demand and declining US cattle herds. Individually quick frozen (IQF) chicken prices also increased, signalling strong consumer demand despite ongoing recovery from the 2023 avian flu outbreak.
However, disease outbreaks in pig and cattle populations continue to threaten supply stability.
“SA households may see some price firmness in meat products, particularly pork and beef, as local supply remains tight and global trends filter through,” Anchor said.
Although dairy price increases have moderated, significant year-on-year gains — particularly for butter and milk powder — may begin to filter through to processed food and dairy product prices in the coming months, Anchor said.
Additionally, the effects of disease outbreaks on milk production could contribute to marginal price increases for fresh milk and other dairy staples.
Looking at fresh produce markets, Anchor noted that banana volumes had stabilised, but prices remained high due to earlier supply disruptions from Mozambique. Apple exports rose 3% year on year, yet local volumes have been slow to recover. Potato supply increased in March, but recent rainfall in Limpopo may affect availability and pricing in April. Meanwhile, onion prices have fallen 25.7% year on year, driven by oversupply.
As a result, bananas may remain costly in the short term, though improved supply from Mozambique could ease prices. Apples are likely to become more affordable as local availability improves. Potatoes may stay cheaper unless harvests are disrupted. Onions should remain low-priced unless excess stocks begin to clear.
Fuel price cut comes at right time for farmers
The recent drop in fuel prices is good news for farmers, as it comes just in time for the busy season in agriculture.
The department of mineral and petroleum resources this week announced a 22c/l decrease to the retail prices of 93 and 95 unleaded petrol, a 41c/l drop in the wholesale price of 0.005% low-sulphur diesel and a 42c/l drop for 0.05% high-sulphur diesel. Illuminating paraffin will drop 42c/l.
“We are now heading into the increased demand for fuel period in agriculture due to the summer crop harvesting and the planting of winter crops,” FNB senior agricultural economist Paul Makube said.
He said this would boost farmer profitability as fuel accounts for almost 13% of input costs in grain production.
“Farmers will soon ramp up their harvesting of 4.44-million hectares under summer crops as well as planting of 827,970 for winter crops.
“Further, the export season for citrus has begun and will benefit from the reduced cost of distribution of produce to ports,” he said.
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