Food inflation at two-year high

29 August 2011

Food and beverage inflation from July 2010 to July this year was at its highest level since July 2009, according to the National Agricultural Marketing Council’s quarterly food monitor released on Friday.

The food inflation rate for this period was 7.4%.

July was the fifth month in a row that food and non-alcoholic beverages inflation was higher than the consumer price inflation rate, which increased 5.3% between July 2010 and July 2011, the council said in a report.

The annual increase of 7.5% in the food and non-alcoholic beverages index was largely driven by the annual increases in oils and fats (24.1%), meat (11.4%), bread and cereals (9.5%) and sugar (8.9%).

The prices of processed food products increased by 8.9% from July 2010 to July 2011 and the price of unprocessed food products increased by 6.2% over the same period.

Rural consumers paid R12.06 more than urban consumers for the same food basket, a significantly lower price difference than usually reported, the council said.

The cereals price index showed the largest increase, of 76% on an annual basis, followed by a 64% increase in the sugar price index.

Oils increased by 57%, meat by 22% and dairy by 17% on an annual basis.

The council said that the cost of a basic food basket increased by about R24.70 – or just under seven percent – from July 2010 to July 2011.

In comparison, the increase was 3.3% from April 2010 to April 2011.

The cost of this food basket expressed as a share of the average monthly income of the poorest 30% of the population increased from 32.8% in July 2010 to 35% in July 2011.

The council expected food inflation to increase at a faster rate in the next quarter from September to November 2011.

“Higher commodity prices as well as increasing costs in the food value chain are gradually working their way into food prices, and given the typical lag between producer and consumer prices, it is likely that food prices will increase at a faster rate over the outlook period.”