Food Price Monitoring Report

1
Food Price Monitoring Report
Food Cost Review 2005

• National Agricultural Marketing Council (NAMC)

2
Outline

• The NAMC
• Food Price Monitoring (FPM) background
• FPM Committee 2003 key TOR
• FPMC key findings
• FPMC key recommendations
• Follow up FPM work Food Cost Review
• Food Cost Review 2005 observations
• Latest CPI (Food) figures
• Concluding remarks

3
The NAMC

• Statutory body Marketing of Agricultural
  Products Act (MAPA) 1996
• Advisor to the agriculture Minister on
  agricultural marketing

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Background to FPM

• Many HHs in RSA are poor food insecure
• Approx 14 million S. Africans are vulnerable to
  food insecurity (Stats SA)
• In 2001/2002, many HHs were affected by rising
  prices of basic foods
• Minister established the FPMC in Jan 2003

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FPMC 2003 Key TOR

• Monitor the pricing of basic foodstuffs
• Investigate any sharp or unjustified price
  increases
• Determine the competitiveness of production
  operations
• Investigate incidents of predatory pricing and
  monopolistic tendencies

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FPMC key findings

• Initial sharp increases in basic food commodity
  prices (notably maize) in 2001/02
• In some cases prices increases were far above the
  current rate of food price inflation (e.g. milk,
  peanut butter, margarine, onions)
• Poor HHs experienced higher inflation rates than
  richer HHs
• Prices in rural stores generally higher than in
  urban stores (in processed goods)
• Levelling off some decline in food prices
  noticeable in 2002/03

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FPMC key findings

• Subsequent cooling off of prices not as high as
  initial spikes
• NB lower food price inflation not necessarily
  translates into cheaper food!
• Some evidence of oligopolistic behaviour and
  monopolistic competition among some food
  industries
• Limited number of competitors, brand loyalty,
  etc. - dictation of prices by retailers
  processors

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FPMC Key Recommendations

• Strategic grain reserves
• Direct government programmes
• Increasing competition and reduced barriers to
  entry
• SAFEX rules transport and logistics
• Improved agricultural information systems
• NAMC to continue with food price monitoring

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FPM follow up work

• NAMC to monitor both urban and rural food prices
• Publishing of an Annual Food Cost Review
  Quarterly Food Price Trends and media release
• Urban food price monitoring progressing smoothly
• Rural food price monitoring experiencing some
  challenges

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Published Documents
Year Publication Publication date
2004 Food Price Trends Report 2000 to 2004 July 2004
2004 Food Price Trends Report January to December 2004 March 2005
2004 South African Food Cost Review 2004 July 2005
2005 Food Price Trends Report January 2004 -April 2005 June 2005
2005 Quarterly Food Price Trends Report August 2004 August 2005 October 2005
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Year Publication Publication date
2005 Food Price Trends Report December 2004-Decmber 2005 February 2006
2005 South African Food Cost Review 2005 July 2006
2006 Food Cost Trends Report April 2005-April 2006 June 2006
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Food Cost Review 2005

• Reports key contents
• Food price inflation 1991 2005
• Trends in retail food prices 2004 - 2005
• Methodologies for calculation of farm value
  farm-to-retail price spreads some estimations
• Trends in prices of marketing inputs
• Case studies (tomatoes onions)

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Food Cost Review 2005

• Food price inflation measure of rate of increase
  in prices of food items in the food basket
• CPIF for most food commodities in rural areas
  generally higher than in urban areas (p8)
• Due to transport costs from urban value-adding
  firms, storage costs, extra labour, business
  risk, limited supply, etc.

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Food Cost Review 2005

• Farm value measure of return received by farmers
  for farm-product equivalent of retail food sold
  to consumers

Dairy Low fat Full cream Cheddar Cheese Butter
Farm value R0.90/L R1.48/L R17.20/kg R24/kg
Share 19.56 33.74 52.68 71
15
Food Cost Review 2005
Maize meal Super Special
Farm value R849.89/ton R674.94/ton
Share 32.92 30.44
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Food Cost Review 2005
Product Unit change in retail price Dec 2004 Dec 2005
White Bread 700g 0.5
Brown Bread 700g 4.2
Super Maize Meal 5kg -8.8
Special Maize Meal 5kg 5.6
Cabbage Head 13.1
Whole fresh chicken Unit 16.2
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Food Cost Review 2005

• Trends in prices of marketing inputs
• Very small effect of fuel price on the CPI in
  both rural urban areas
• Price of packaging material initially increased
  (2002) but eventually levelled off by 2005

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Latest CPI Food figures

• CFI Food in April was 6.2 (up from 4.4 in
  January( (Stats SA)
• Prices for the following food items increased by
  more than 6 (year on year in April 2006)
• Super Special Maize Meal
• Beef, mutton, chicken
• Sugar
• Rice

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Concluding remarks

• Poor consumers especially in rural areas have
  suffered the most from the price hikes of 2001/02
• Subsequent levelling off has not been fully
  realised by consumers
• Opportunity for price dictation by processors and
  retailers detected
• This issue will be subject of further research by
  NAMCs Markets Economic Research Centre
• The findings will inform the work of the
  Competition Commission