Good and bad news about grocery prices in South Africa
Although the prices of some essential food items have seen improvements, others remain under pressure, while retail margins on certain staples continue to raise concerns.
The latest Essential Food Price Monitoring (EFPM) report, released by the Competition Commission, tracks a list of essential food items in South Africa – sunflower oil, brown bread, eggs, IQF chicken and maize meal.
The previous edition of the report revealed several encouraging signs of easing cost pressures that would have restrained food price increases going forward.
These paid off in the latest report, which found a modest decrease in the prices of some of the food items it tracks.
“This is a positive sign that, for some foods, production costs continue to ease, and producers and retailers are starting to adjust prices accordingly,” the report read.
However, on a less positive note, 2024 was a difficult year for maize farmers who faced dry conditions due to drought at a critical stage of the growing season.
As a result, maize meal prices have started to rise at both the producer and retail levels.
“Events such as droughts are regional and have cascading effects across value chain actors and export markets. This, in turn, means that their ultimate impact on prices is influenced by local conditions and those of our export partners.”
The commission explained that its essential food price monitoring indicates that consumers are slowly feeling the benefits of easing cost pressures throughout the economy.
“Nevertheless, monitoring remains necessary to ensure that as costs decline upstream, those are passed through quickly and proportionately to retailers and subsequently consumers,” it said.
“This transparency is necessary to deter profiteering, which is typically enabled by a lack of information.”
“Naturally, new risks emerge that may reverse cost reductions such as the recent African armyworm infestation in Gauteng, Mpumalanga and Limpopo and potential avian flu contagion from the Northern Hemisphere.”
Listed below are the essential food items tracked by the report and how their prices are faring.
Sunflower oil
The report revealed a more responsive price for sunflower oil, with the gap between farm value and producer prices falling from 27% to 23% from September to December 2024.
“This welcome change was caused by lower producer prices towards the end of 2024,” the report explained.
Previously, producer prices had risen even though seed prices remained stable, leading to wider price gaps.
“In general, spreads looked better at this level of the value chain for 2024 than they did in 2023, indicating better and more responsive price transmission.”
However, the gap between producer and retail prices remains at its highest level since 2021.
Retail prices for sunflower oil have not dropped in response to lower producer prices, raising concerns about retailer pricing behaviour.
For example, when producer prices fell sharply in September 2023, retail prices stayed high, keeping the gap above 39%, where it has remained.
Even recent, albeit smaller, producer price cuts have not led to lower retail prices, suggesting that retailers may be maintaining higher profit margins.
Eggs and chicken
Egg producer prices are also currently cheaper than they were in 2023, although they remain appreciably higher than the long-term average.
The highly pathogenic avian flu outbreak that occurred towards the end of 2023 severely affected the egg value chain.
Even a year later, prices have been slow to recover.
At the time of the outbreak, industry players predicted that flocks would normalise in May 2025, 17 months after the outbreak.
Fortunately, the signs of recovery are evident in the fact that egg producer prices are currently cheaper than they were in November 2023.
This recovery has been supported by biosecurity measures, monitoring programs, fertilized egg imports, and tariff rebates.
“However, the producer-to-retail spread has widened recently but remains below the levels from before the outbreak.”
“This suggests that retailers have started trying to claw back their margins on eggs, which seems premature given that producer prices have not recovered fully.”
The price of IQF chicken remained stable with modest increases coming through at the producer and retail level.
The gap between producer and retail prices is still below 38%, suggesting that there has not been a significant change in retailers’ and producers’ pricing behavior.
“Major players in the poultry industry have experienced improvements in operations and profitability which were supported by favourable commodity and feed prices, easing load-shedding and lower avian-flu related costs.”
Brown bread
Lower average retail prices for brown bread were observed during the period under review.
The farm-to-producer spread for brown bread increased from 75% to 77% from August 2024 to December 2024. This expansion occurred because lower wheat prices did not translate to lower bread producer prices.
The Commission has previously noted that the spread at this level of the value chain has expanded over time and is largely driven by higher producer prices that are slow to respond to changes in input costs.
This may warrant proactive engagements, including analysis of major players’ financial results, to understand dynamics at this level.
By contrast to the producer level, spreads at the retail level show indications of long-term decrease.
In recent months, the spread has remained between 17% and 18%, compared to early 2024, when it was closer to 20%.
The decrease in the spread is largely due to lower average retail prices for brown bread.
Canned pilchards
The price gap between producers and retailers for canned pilchards has also been shrinking over the past six months, dropping from 19% to 17%.
This follows a steady trend of declining price spreads for the product.
The decrease is due to a slight drop in retail prices – from R27.81 to R27.46 – between August and December 2024, while producer prices increased from R22.54 to R22.84 during the same period.
The report praised the restraint shown by producers and retailers in their pricing behaviour for this product in previous editions of the EFPM report, noting that it is encouraging that this trend has continued.
Maize meal
The maize meal value chain has been under immense pressure since the midsummer dryness in February 2024, which had a disruptive effect on maize supplies in the country.
“From a pricing perspective, the upward trend that began in March 2024 continued for the rest of the year. However, higher white maize prices have not been fully transmitted to producer prices.”
“Consequently, the farm value to producer price spread has narrowed to 20%, the lowest since November 2022.”
“So far, the higher white maize and maize meal producer prices have not translated into higher retail maize meal prices. The more stable average retail prices have resulted in the spread falling from 33% in September 2024 to 26% in December 2024.”
The report stressed that South Africa is not out of the woods yet regarding white maize prices and stressed that the Commission will continue to monitor these prices in the coming months.
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