Food Price Monitoring Committee: Final report

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Food Price Monitoring Committee Final report
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Mandate

• Established under Section 7 of the Agricultural
  Marketing Act.
• Terms of reference
• Monitor the prices of basic foodstuffs
• Investigate any sharp or unjustified price
  increases.
• Investigate price formation mechanisms within the
  value chain of basic food stuffs
• Investigate collusive, discriminatory or any
  unfair business practice in the basic food value
  chain
• Recommendations
• Report quarterly to Minister

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Monitoring Task

• Selected 26 basic food commodities
• Continous monitoring at 6 monitoring points in
  all 9 provinces (urban and rural) since October
  2002.
• Also monitored farm requisites fertiliser,
  chemicals and animal feed
• Inputs from consumer forums, public, and annual
  minimum standard of living survey.
• Retail scanner data
• Other official data sources

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Investigations on Pricing behaviour

• Investigations
• marketing margins and farm-to-retail price
  spreads
• influence of changes in the exchange rate and the
  in the costs of processing and marketing in the
  food chain
• farm-to-retail price spread in the case of spaza
  shops and other rural stores
• Analysis of price transmission in the food chain
  and role of market power

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Outline of the report

1. Summary report
2. Introduction and background (context, issues,
   framework, data sources)
3. Monitoring price trends
4. Investigation of SAFEX market and detail analysis
   of 8 supply chains
5. Other aspects Inputs, silos, transport,
   retailers, market power
6. SADC food security situation
7. Recommendations

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• Some highlights..

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SAFEX white maize price and maize meal price Jan
2000-June 2004
46.3
Average Maize meal price Jan00-Jan02. R23.5/10kg
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166
Average SAFEX price Jan 00-Sep01 R743/ton
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Average monthly retail prices for brown and white
bread Jan 2000 June 2004.
33
Average Brown Bread Price Jan00 Nov01 R3.14
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57.2
15
Average SAFEX price Jan00-Oct01 R1321.73/ton
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Average monthly retail prices for 1kg Tastic
rice Jan 2000 June 2004.
Average price of rice Jan00-Dec01. R6.67/kg
16.9
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Real SAFEX white maize and maize meal prices.
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Real bread prices
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Real chicken prices
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Real stewing beef price
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Real milk prices
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• .Part 4 Was the SAFEX market manipulated??

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Actual and estimated SAFEX wheat prices
Main variables driving the long-run SAFEX wheat
nearest month contract price R/ exchange rate
and US 1 hard red prices.
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• Supply chain analysis..

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Average Cost of Producing White Bread Feb00-Dec02
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Maize Milldoor prices and Margins
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Maize Real Wholesale to- Retail Margin
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Findings

• Price trends Difficult to generalise but food
  prices did recover to lower levels.
• Food basket somewhat cheaper
• Monitoring had positive effect
• Supply chain analysis Provided clearer
  understanding of costs and market structure.
• Market structure could provide opportunity for
  predatory and unjust pricing but little evidence
  of such practices

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Recommendations

• Continue price monitoring SA Food Cost Review
• Strategic grain reserves Will have limited
  impact at high costs
• Options for direct government action for
  household food security Some already implemented
• Improved agricultural information systems
• Others
• monitor competitive environment
• rules for derivatives market (SAFEX)
• Transport infrastructure