The commission’s latest Essential Food Pricing Monitoring Report says input costs have declined, which should see a price reduction, but that’s not happening fast enough.
The competition watchdog released its latest Essential Food Pricing Monitoring (EFPM) Report, which tracks essential food prices throughout the value chains of selected essential food items, on 4 October 2024.
The Competition Commission suggests that food prices may be starting to stabilise, largely due to the end of rolling blackouts (which stopped on 26 March), the stronger rand and lower fuel costs — factors that had been significant contributors to elevated food prices. However, there is no reduction in retail prices yet.
Despite a decrease in farmgate prices for wheat, the producer price of brown bread has increased. The average producer price of cooking oil has dropped significantly, the report said, but it has not translated into lower retail prices. As a result, the producer-to-retail price gap for cooking oil is now higher than it was just before the start of the military operations in Ukraine. There are concerns signs that maize meal prices are once again rising due to the drought.
The effects of avian flu still lingered in the local poultry market. The commission said the avian flu outbreak last year had a devastating effect on the local poultry market resulting in 8.5-million chickens being culled between April and November 2023.
The commission is particularly concerned about food security, especially for the poor. Ranenyeni said although inflation has decreased over the past six months from 10% (and even greater for food inflation) to 4.4%, prices have not reduced. It has tracked the work of the Pietermaritzburg Economic Justice and Dignity Group, which shows that minimum-wage earners cannot afford the basic food basket. The cost of this basic food basket has increased by more than 50% since September 2020, making it less affordable for households earning the national minimum wage.
Highlighting the “rockets and feathers” phenomenon, she said that prices were quick to rise but slow to fall, as also seen with sunflower oil and maize meal prices, which were pushed up temporarily due to the drought but have not yet translated to retail level, despite cost decreases. The slow pace at which cost reductions were being passed onto consumers has raised concern that retailers are potentially exploiting the situation for profit.
Producers and retailers are “quick to increase prices if there’s an input cost increase, but slow to decrease them when the cost pressure eases,” noted the Commission official.
Rockets and feathers were prevalent in most of the products that they track over time, but they have started seeing companies being more responsive to the commission’s concerns, reflecting the positive impact of these reports, she added.
At the retail level, the commission compared South African retailers’ margins with other countries, and found that they had higher margins than their counterparts in other countries.
The report also included an analysis of financial market speculation and implications for prices in food markets. The analysis assessed whether the recent commodity prices levels and increases had been driven by an increase in speculation in the local market.
The analysis did not find evidence that speculation drove up the prices of white maize, wheat and sunflower seeds.
Sources: Daily Maverick, Times Live
