Trends in selected food prices and policy responses By Sithembele Kelembe 29 June 2009 1
Table of contents Trends in commodity and food prices in South Africa Pressures on Agriculture Policy interventions 2
1. COMMODITY AND FOOD PRICE TRENDS IN SOUTH AFRICA 3
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Price per ton (R/ton) SAFEX, import parity and export parity prices of wheat 5000.00 4000.00 3000.00 2000.00 1000.00 0.00 Import parity price of wheat Export parity price wheat SAFEX price of wheat Mar-08 Dec-08 Mar-09 Dec-08 to Mar-09 Mar-08 to Mar-09 Import parity price of wheat 4,821.00 2,630.96 2,869.96 9% -40% Export parity price wheat 3,150.99 1,577.69 1,744.16 11% -45% SAFEX price of wheat 4,071.63 2,521.30 2,666.95 6% -34% 4
Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 SAFEX price of wheat (Rand per ton) Bread price (Rand per 700g) Bread price versus wheat price Downward stickyness 4500 8.50 4000 3500 Upward stickyness 8.00 7.50 7.00 3000 6.50 2500 6.00 2000 1500 5.50 5.00 4.50 1000 4.00 SAFEX price of wheat Loaf of brown bread 700 gram Loaf of white bread 700 gram 5
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Price per ton (R/ton) SAFEX, import parity and export parity prices of maize 4000 3500 3000 2500 2000 Local production > local consumption = Price moved to export parity This is indicative of production space/reserve utilised in a profitable manner 1500 1000 500 0 Import parity price of maize Export parity price of maize SAFEX price of maize Mar-08 Dec-08 Mar-09 Dec-08 to Mar-09 Mar-08 to Mar-09 Import parity price of maize 2,649.73 1,914.08 2,229.33 16% -16% Export parity price of maize 1,580.18 1,238.93 1,458.75 18% -8% SAFEX price of maize 1,920.00 1,643.70 1,531.45-7% -20% 6
Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 Maize meal (R/5kg) Maize (R/ton) Maize meal price versus maize price 28 2,150 25 23 20 1,900 1,650 18 1,400 15 1,150 13 10 8 900 650 5 400 Maize Super 5KG Maize Special 5KG White maize R/ton Apr-08 Jan-09 Apr-09 Jan-09 to Apr-09 Apr-08 to Apr-09 Maize Super 5KG 20.63 23.10 22.20-3.9% 7.6% Maize Special 5KG 16.78 18.89 17.62-6.7% 5.0% Average -5.3% 6.3% White maize R/ton 1,856.62 1,814.33 1,630.22-10.1% -12.2% 7
Summary Other commodity prices moved in similar way in SA. Price transmission different in different chains due to nature of chain and type of product. Signs that prices are slowing significantly. Questions regarding supermarkets power in the chain 8
2. PRESSURES IN THE CHAIN 9
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Jun/08 2000=1 Profitability 1.20 1.15 1.10 1.05 1.00 0.95 0.90 0.85 Terms of trade Source: Own calculations based on data from DoA, 2008 10
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Index (2000 = 100) Agricultural production not keeping up with population growth 130.0 Population has grown by 32% since 1991, but production has grown 10% overall. Not taking into account immigrants from neighbouring countries 120.0 110.0 100.0 90.0 80.0 70.0 60.0 50.0 40.0 Field crops Horticulture Animal production Total 11
Concentration (market power) in the chain Low investment in R&D Infrastructure deficiencies especially in transport Farmer support programmes 12
3. POLICY INTERVENTIONS 13
SHORT-TERM POLICY INTERVENTIONS An Integrated Food Security and Nutrition Program (IFSNP) used as an anchor program to address food insecurity across the country, Expanded the coverage from 70 000 to 300 000 poor households Expanded the Household Food Production Programme through a One household, one food garden campaign. Through this program, farmers/poor households are provided with production starter packs for: Vegetable Production Livestock Production Dairy /Milk Production Poultry Production Broiler production Layers Expanded the School Feeding Programme to include nursery schools introduced one meal per day for all school days per learner from poor households
SHORT-TERM POLICY INTERVENTIONS. Adjusted the social grant system to be linked to food prices (adjusted to food price inflation). Introduced the Social relief of distress grant to households with income below R800,00 per month, Introduced a range of social support grants such as a grant for child headed households, disability grant, old age pension, child support grant, etc to promote food security. Working with humanitarian and church based organizations on food distribution and coordinating donations (Food banks were introduced). Expanded the labour intensive income generating Public Works Program to build economic and social infrastructure such as schools, clinics, stadia, roads, removal of alien plant species, controlling soil erosion, etc
OUTCOMES OF THE INTERVENTIONS Levels of observed malnutrition at schools has come down All poor households have been identified and are in the national database for continuous tracking Limited impact observed as more and more people fall into the poverty and unemployment trap as a result of the economic crisis due to large scale retrenchments and limited job opportunities A thorough impact analysis of the programs will be undertaken in due course.
Summary Price crisis (affordability) not food crisis (availability) No market interventions were introduced but direct RESPONSIVE assistance to poor was introduced, (Social food safety nets programs) Quicker responses on supply (production support) and demand (food safety nets to the poor) side Strengthened the application of competition laws to discourage anti-competitive practices in agro-chains.
THANK YOU FOR THE OPPORTUNITY 18