The Food Price Monitor for August, which was released yesterday, 31 August 2009, by the National Agricultural Marketing Council, said food prices were expected to increase in the next few months due to “pre-season uncertainty”.
Though prices of beef, bread, maize meal and sunflower oil would increase, it would be at a slower rate, said Andre Jooste, an economist at the council.
The report said local speculation regarding the next season's plantings and weather patterns will influence price movements, as would the possibility of El Nino dry seasons.
It states that the current “relatively low” market prices are likely to induce a reduction in plantings, and maize prices are expected to trade “above export parity levels over the next three months”.
Typically, meat prices should be moving into an upward trend by October and November, but this year the increasing price trend could be “dampened by a significant positive shift in the supply of beef”.
Beef supply is expected to increase over the next months due to the fact that many maize producers have opted not to sell their maize at the low market prices but rather use the maize as feed for their livestock.
The report also highlighted that the costs of beef production have increased, which implies that any decrease in the price of beef due to an increase in the supply can put prices under pressure.
The report said: “Severe cold weather in parts of the country where the crop is not normally affected by frost has damaged a significant portion of the crop that was scheduled for early delivery on the market.
“Prices are expected to remain high until farmers respond to the high prices and increase plantings. ”
The report's findings contradict economists' forecasts that food prices would drop in the next three months.
Mike Schussler of Economists.co.za said food prices are like to decline in the next month, but the El Nino effect will “make the prices rise afterwards”.
“This might result in people buying cheaper food items and cutting down on what they deem as luxury goods, which might include meat.”
Schussler said it is not “a done deal” that there will be dry seasons, but added that if it happens the lack of rain would definitely affect prices.
Jooste said: “We are quite happy that food price inflation is down.
“However, we are still concerned that food prices haven't come down yet in the past months.
Source: The Times
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