South Africa’s food price inflation could soften in the coming months
South Africa
Published Jun 9, 2021
Tridge summary
It sometimes feels like there is little more to discuss regarding South Africa’s consumer food price inflation. The local crop data continue to show that there are ample domestic supplies on the back of large harvests in field crops and horticulture, which would have ordinarily led to a decline in prices.
Original content
Still, the question that repeatedly comes out in discussions with various stakeholders in the food industry is the impact of higher global prices on the domestic food market and whether this is the reason local prices have remained elevated in the face of a large harvest. This is an important consideration because the price developments we have witnessed in South Africa’s soft commodities prices, specifically grains, in recent months reflect spillovers from the global market. This begs the question of where global grain prices are likely to go from here and how this could affect South Africa. Before getting into the outlook for global grains, let us recall that South Africa is typically a net exporter of maize and is therefore well integrated into global markets. My rough calculations, using high-frequency data (daily data with more than 300 observations), shows that the correlation between domestic and international maize prices remains positive, about 60% for white maize (which ...
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