SOUTH African consumers can expect further price hikes in bread and flour products, following India’s ban on the export of wheat causing further constraints on supplies of the vital food crop.
Neil Wilson, chief market analyst at Market.com, said yesterday: “More stress in commodities with Indian banning wheat exports, which sent prices up 6 percent this morning to the highest in two months.
“After the late-February and early-March volatility there has been some calm restored to global commodity markets over the last month or so, albeit prices have remained elevated. India’s export ban betrays the underlying stress that resides in the commodity space."
Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo said yesterday that further price hikes in wheat in South Africa were likely after the ban, issued late last week.
India's reasoning for this move was similar to that made by Indonesia, when that country banned palm oil exports. The official statement said it wanted to manage its overall domestic food security and support the needs of neighbouring countries.
India is a substantial player in the global wheat market, and is ranked the eighth-largest wheat exporter in the world.
South Africa imports about 40 percent of its wheat, and in the past almost a third came from Russia and Ukraine, but due to the war that supply has been cut off.
The move is expected to raise the price of bread locally as wheat is a key ingredient.
The April 2022 Household Affordability Index, which tracks food price data from 44 supermarkets and 30 butcheries in Johannesburg, Durban, Cape Town, Pietermaritzburg and Springbok, showed that in April 2022, the average cost of the Household Food Basket was R4 542.93.
The average cost of the basket increased by R92.84, up 2.1 percent, from R4 450.09 in March. It found a significant increase of above 5 percent in the price of bread.
Global grains and oilseed prices have remained elevated in recent months as Russia wages war in Ukraine.
The FAO Global Food Price Index averaged 156 points last month, down marginally from the all-time high recorded in March, although still 30 percent up from April last year.
Agbiz said these price increases had put pressure on consumers worldwide just as households were emerging from the economic shock of Covid-19. It was starting to see the second round of export bans of key commodities, all with the purported aim of protecting domestic consumers.
Over the weekend, G7 agriculture ministers condemned India's decision to ban wheat exports, noting that such export bans would worsen the global food crisis.
The G7 agriculture ministers’ official communiqué further stated that they would continue to avoid any unjustified restrictive measures on exports that could exacerbate the increases in food and input price volatility already seen in international markets, and that could thereby threaten the continued recovery of all facets of global food supply chains and, more broadly, food security and nutrition.
Agbiz said that while the full impact of these policy actions on prices was yet to be seen, governments throughout the world should do all they could, using their fiscal abilities to support agricultural production, avert a global food crisis and not resort to trade policy instruments that hurt the developing world.
"The focus should be on supporting the farmers to increase production and fill the gap in supplies created by the closure of Black Sea exports due to Russia's invasion of Ukraine. The frequent export bans present additional uncertainty to agricultural markets and heightened price volatility, so the G7 agriculture ministers must take a stand against such actions,” Sihlobo said.
BUSINESS REPORT ONLINE