South Africans farmers have produced excess maize and the country has imported enough wheat, meaning the country’s food security will not be affected by the Black Sea grain deal falling apart.
But economists have warned that prices of these commodities could rise in 2024. Rice prices could also rise because India has banned exports from this month to keep its local prices low.
The Black Sea grain agreement was negotiated in July 2022 to allow Ukraine to export wheat and seed oils to ensure global food security, even while at war with Russia. The deal was suspended last week when Russia said it will treat ships carrying food from Ukraine as military targets. This could lead to lower wheat supplies globally, pushing up prices.
Economists told Business Day that SA’s bumper maize crop in 2023 and sufficient imports of wheat mean food security is not at risk. It is likely food inflation will still come down “a bit” in 2023.
Ultimately, global prices do affect what SA and consumers ultimately pay. There is, however, a lag of a few months between price hikes in soft commodities and the cost of food. When maize, wheat and soya bean prices rise, bread prices rise and animal feeds increase in cost, increasing the cost of meat, eggs and dairy.
But prices of maize have been coming down for months and this should reflect in food price inflation stabilising.
Agriculture analyst Thabile Nkunjana said: “Worldwide wheat and maize indices were 17% and 19% lower year on year as of July 21, reflecting abundant supplies from the worldwide market.
“The decrease in global grain prices can be attributed to a variety of factors, including improved supply chain networks, lower shipping rates, increased grain production globally and, of course, the Black Sea grain deal, which allowed grains to be exported to the global market, thereby containing international food inflation.”
He said it is not clear when prices will rise due to the cancellation of the Ukraine deal and it also depends on how long the “Black Sea grain blockage will endure”.
He said that even though SA imports 70% of its rice from Thailand, the Indian rice ban will affect global rice prices. “Because of the amount it produces and sells globally, India wields much too much influence over global rice pricing. When it curbs rice exports, other exporting countries are expected to witness greater demand, driving up prices for rice importers worldwide.”
Agricultural economist Wandile Sihlobo writes that “given the importance of India in the global rice trade, if the country proceeds with the export ban, we will all feel its impact through a potential upswing in global rice prices. This would disrupt the declining trend of the global food prices we have all been observing.”
Writing in a AgriBiz newsletter, Sihlobo said he is confident food inflation will continue to slow before it increases. “While there are renewed risks in global agriculture, we are still positive that SA’s consumer food inflation will continue to slow during this second half of the year.”
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