Recent consumer price index data indicates that in August 2016, headline inflation decelerated to 5.9% year-on-year (y/y) from 6% y/y in July 2016.  Overall food and non-alcoholic beverages inflation remained unchanged from the previous month, at 11.3% y/y. However, leaving beverages component aside, food inflation accelerated to 11.6% y/y from 11.5% y/y in July 2016.

  • The food and non-alcoholic beverages basket consists of bread and cereals, meat, fish, milk, eggs and cheese, oils and fats, fruit, vegetables, sugar, sweets and deserts, non-alcoholic beverages and other foods. Each of these products is allocated a weight, with the largest being meat and bread and cereal, which make up 30% and 23% of the food and non-alcoholic beverages basket, respectively.
  • The increases were recorded in bread and cereals; milk, eggs and cheese; fish and sugar, sweets and deserts, whereas other food products decelerated (see Chart 1).
  • The increase in bread and cereals inflation is still reflective of the effects of the 2015/16 drought, which has led to lower grain supplies and in turn higher prices (see Chart 2). Additionally, the increase observed in eggs inflation is in line with increases in feed prices (grain prices). The increase in milk and cheese inflation coincides with seasonal milk prices, which normally reach higher levels during winter season owing to lower domestic supplies. Lastly, the increases in sugar, sweets and deserts inflation signifies the effects of the 2015/16 drought on sugar cane production.
  • Looking ahead, we believe that dairy inflation could remain elevated over the next few months, with prices expected to decelerate when grazing fields start to recover later in the year on the back of summer rainfall. Meat inflation could accelerate in the coming months, as we continue to anticipate a decrease in cattle slaughtering pace. We expect bread and cereal inflation to remain elevated until mid-2017 when the new crop gets harvested. Worth noting is that over the past few weeks, grain prices have maintained a downward trend. However, its sustainability will depend on the ZAR/USD exchange movements (Chart 2).


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Wandile Sihlobo
Head of Agribusiness Research
Tel: +27 12 807 6686