JOHANNESBURG – THE current rains have raised hope South Africa will tame food inflation in 2017.
“The past year has been testing for the industry; the drought has had an impact on the economy with South Africa’s gross domestic product (GDP) decelerating in 2016,” says Paul Makube, Senior Agricultural Economist at First National Bank.
“We anticipate that prices will moderate now in 2017 as the new season production outlook improves with the rains across the producing areas.”
He forecasts production of crops such as maize, wheat, sugar and horticulture to improve.
The analyst forecasts the prices of beef, pork and poultry to slow down.
While the improved domestic and international agricultural production outlook bode well for food inflation, the prospects of a weaker exchange rate might offset this benefit given that pricing for most grain commodities is based on import parity.
Though the rand currently remains at its best level at around R13,60 vs R15,75/ US dollar last year this time, it faces increased volatility in the medium to longer term due to among others the renewed interest rate tightening by the US Federal Reserve Bank (US Fed) and weak domestic growth prospects.
“Overall, 2017 has started off well, with good rainfall in some parts of the country. The year ahead will still be trying, but the silver lining is that we are starting to see a little relief from the recent rains and the sector is slowly stabilizing,” concludes Makube.
– CAJ News