Economist warns of devastating food price increases

A deal between Russia and Ukraine allowing the export of grain from the Black Sea has been allowed to lapse, threatening global grain supplies and potentially raising the prices of basic foodstuffs around the world. 

Efficient Group chief economist Dawie Roodt spoke to Newzroom Afrika about the expiration of the deal and the potential impact on food supply in Africa. 

Since the deal expired, grain prices have risen by 3%, which is not a significant increase. However, if the deal is not reinstated, the potential effects will be devastating for Africa. 

“I do not foresee any significant impact on food prices in South Africa, but if it goes on for a long time, it will have a devastating impact on food prices,” Roodt said. 

“Food prices can go up much more. Potentially up by 10 to 15% in South Africa on top of the 12% food inflation we are already experiencing.”

This is despite South Africa being in the fortunate position of being self-sufficient in terms of food supply. Many other African countries will be worse off as they import large proportions of their food. 

Roodt said there have already been protests about food shortages and prices in parts of Africa such as Nigeria. 

While South Africa is self-sufficient, the prices of agricultural commodities are set globally, so it is not immune to price fluctuations in Europe, the United States, or Asia. 

The price of grain has a universal impact on food prices as it is an input in many agricultural products, such as livestock feed. 

However, the recent strengthening of the rand may soften the impact of rising grain prices globally. 

The United States and European have significant grain reserves, so, in the short term, grain prices are unlikely to rise significantly. 

Roodt was also positive that the deal would be reinstated or extended relatively quickly. 

Roodt’s warning that food prices may rapidly rise comes on the back of concerns that food prices are proving sticky and will remain higher for longer in South Africa. 

Pietermaritzburg Economic Justice and Dignity Group’s (PMBEJD) food basket of 44 basic goods declined by R15 in June to a total price of R5,056.

However, while the overall price declined, essentials such as maize meal, rice, onions, potatoes, and chicken remained high. 

Mervyn Abrahams of the PMBEJD said that with the prices of these particular items staying high, households will continue to feel pressure in the coming months. 

South Africa is experiencing a peculiar phenomenon with high prices for food being driven by deteriorating infrastructure and intermittent power supply. 

Thus, while global food prices are declining, South Africa’s remains high and, in some cases, are increasing. 

According to Abrahams, South Africa has had consistently good harvests, and oil prices are declining, but many food prices are not declining. 

This is because food processors have to pass on the increased fuel costs to run generators during load-shedding and an inability to get their products to market.