Consumers to feel drought relief

According to reports, the drought that the country suffered in 2016 is over. Wandile Sihlobo, head of economic and agribusiness intelligence at Agricultural Business Chamber, clarified: “A drought in its simplistic definition is pretty much the prolonged dryness for a certain period of time, which is what we experienced last year. Now we see that that pattern has changed. You look, for example, throughout the central and eastern parts of South Africa, provinces like eastern Free State, Mpumalanga, KwaZulu Natal, southern parts of the Eastern Cape, we have seen some pretty much good rainfall in those areas.”

However, that doesn’t mean that we should dance through our sprinklers for joy just yet as the impact of the drought will still be felt for a while yet. For example, consumers can expect to see food prices staying the same for the time being.

Food price inflation

Despite the rain, consumers will not see a change in food price inflation anytime soon. While inflation will start to decline, we are still several months away from that happening. “I think that only in the third quarter, that is where you should start to see some big difference, because at that time, all the harvest will be off the fields and then that starts to be felt coming through. But we will be watching of course to see how these trends go, it is under the assumption that the rainfall that is expected will materialise as we expect,” said Sihlobo.

Sihlobo adds that this relief price to consumers will only be felt if the country receives consistent rainfall until at least the end of February when the summer crops pollinate. “If you don’t get rainfall during that time, you might have a problem with your harvest, even though it came up pretty much looking well earlier this year. The focus is still on the rainfall and food inflation is not going to be quick to fall, but third quarter you could start to see some big differences.”

Lingering effects of the drought

The effects of the drought may still be felt for some time. According to Sihlobo, it could take another two to three years for farmers to rebuild their herds and for crops to recover. During the drought about 16,500 head of cattle were slaughtered per week, more than double the 5,500 that were slaughtered between in 2013/2014.

“If you were to take food inflation, last year and you break it down to look at what was pushing inflation upward, everything else went up double digits, but meat prices only went up by 5%. What that tells us is we had that supply cushioning the prices, but now with the rainfall improving and the veld starting to be green, those livestock farmers need to rebuild their herds, and as they do that, they will slaughter less, and that is going to push up meat prices,” explained Sihlobo.

Meat constitutes a third of the food inflation basket, meaning that any upward pressure on meat prices will likely lead to a significant increase in food inflation.

“The upward risk on inflation is meat, but as we go forward we will have to monitor the consumer demand and consumer behaviour in that environment,” said Sihlobo.

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