Food, goods prices set to soar

Source: IOL

South African consumers have been warned to brace for even higher prices this year as global supply chain backlogs are showing no signs of easing and are likely to worsen for the rest of 2022.

This comes as the Food and Agriculture Organisation (FAO) on Friday said that world food prices jumped 12.6 percent in March to a new record high, largely driven by conflict-related export disruptions from the Russia-Ukraine war.

The UN agency’s food price index, which tracks the most globally traded food commodities, averaged 159.3 points in March, compared to an upwardly revised 141.4 points in February.

The war between Russia and Ukraine – two major exporters of wheat, maize, barley and sunflower oil via the Black Sea – caused turmoil in the food markets as supply for staple grains and edible oils stalled. According to the FAO, the biggest price increases were reported for cereals due to a surge in prices of wheat and coarse grains and vegetable oils, fuelled by reduced export supplies amid the ongoing conflict in the Black Sea region and an already tight global availability of wheat, sunflower, palm, soy and rapeseed oils.

The meat index was up 4.8 percent, also hitting an all-time high with pork prices rising the most on record since 1995 due to supply shortfalls in Western Europe and a surge in internal demand in light of the upcoming Easter holidays.

Dairy prices increased by 2.6 percent due to inadequate milk output in Western Europe and Oceania to meet global demand, while sugar rose 6.7 percent, reversing most of the previous three months’ decline. Cargo Compass, a South African freight, logistics and warehousing company that operates worldwide, on Friday said goods prices would also rise sharply in South Africa as supply chain bottlenecks were here to stay for 2022.

Chief executive Sebastiano Iorio said at the start of the year they were hopeful that trade bottlenecks would ease this year, but they seem to be getting even more severe. “Prices of consumer goods like electronics and clothing, including imported basic food products, are certainly going to keep rising,” Iorio said.

“Shortages will have a significant impact on an already fast rising inflation rate.”

Headline inflation in South Africa for 2022 has been forecast upward from 4.9 percent to 5.8 percent, primarily due to the higher food and fuel prices, triggering a tighter monetary policy.

Lorio said that it was not only supply shortages that presented a problem, but rapidly rising freight charges were adding to dramatic price rises in shipped goods.

He said freight rates of South Africa’s three biggest trading blocs – China, the US and the Eurozone – were rising rapidly between 33 and 40 percent over the past 2 years. Iorio said freight costs had risen sharply because of higher oil prices in part driven by the war in Ukraine, the synchronised reopening demand “shock” to global economies, trucker shortages in Europe and the closure of several Chinese ports due to the re-emergence of Covid-19.

“Two years ago, freight rates for a standard 12-metre container from China were $2 000 (R29 280) to transport via sea to South Africa.

“Today it costs $14 000, an increase of more than 500 percent,” he said. Investec chief economist Annabel Bishop said elevated inflation remained a concern for both real incomes and consumption this year, with food prices, and transport costs showing upwards pressure. Bishop said sharply rising prices negatively impacted consumer affordability and so economic demand and, therefore, economic growth. “Higher costs of non-durable goods, which are typically necessities, reduces spend on other items, in the absence of markedly higher real wages,” Bishop said.

“Food on its own has the largest weighting in the cost of living calculation in South Africa.

“Fiscal support has reduced the impact of potentially higher fuel prices, and retailers may limit basic bread and cereal price hikes, but households will face a higher inflation and interest rate environment this year compared to 2021, and likely even higher interest rates in 2023.”


Tags: , , ,

Follow us on social media: 


View our magazine archives: 


My Office News Ⓒ 2017 - Designed by A Collective