The current surge in rice prices was likely to be temporary, Agricultural Business Chamber (Agbiz) chief economist Wandile Sihlobo said yesterday.
The agricultural organisation said that from a volume perspective, South Africa imported about 1.1 million tons of rice annually, and the 2022/23 volume remained unchanged from the previous season. The current global rice price trend and the rand/dollar exchange remained vital variables to monitor in the coming months.
“Still, with the prices of maize and wheat products set to moderate in the second half of the year, consumers may reduce their rice consumption if its prices remain elevated this year," Sihlobo said.
As the demand for rice firmed and the large stocks from the 2021/22 season depleted, the impact of the high consumption levels translated into increasing prices. Agbiz said that according to data from the International Grains Council, the 2022/23 global rice harvest was down by 1% from the previous season at 509 million tons.
CNBC reported last week there was a strained supply of rice as a result of the ongoing war in Ukraine, as well as weather woes in rice-producing economies such as China and Pakistan.
“At the global level, the most evident impact of the global rice deficit has been, and still is, decade-high rice prices,” Fitch Solutions’ commodities analyst Charles Hart told CNBC.
However, Sihlobo said the current price surge would likely be temporary, with prices set to soften when supplies improved next year.
"As a result, we still do not see the rice price increase changing our view of potential moderation in grain-related products within South Africa's inflation consumer food basket this year. Lower maize and wheat prices are likely to be more dominant," he said.
"In recent notes, we expressed a view of potential moderation in the consumer food inflation in the second half of the year. We believe that the products that will underpin this softening are grains-related products, vegetable oils, meat and fruit.
“But within the grains category, South Africa is exposed to imports, particularly for wheat and rice. Global grain prices have declined over the past few months, except rice, which has surged. However, this does not change our view on domestic food inflation," Sihlobo said.
The International Grains Council forecasts a 2% recovery in global rice production in the 2023/24 season to 521 million tons. The increase in expected recovery is predicted across all key producing countries such as India, Vietnam, Thailand, the US, Pakistan, China, Indonesia, Bangladesh and the Philippines.
The production recovery was due to anticipated favourable weather conditions and yield improvement. With consumption in the same season set to improve moderately by 1% to 519 million tons, the global rice stocks could increase, he said. These factors should support some moderation in global rice prices in 2024.
Agbiz said that in April last year, rice from various origins, such as Thailand, Vietnam, India and Pakistan, traded below $400 (R7 234) a ton. This month, except for India, these rice price origins traded over $470 a ton.
According to the 28-item urban food basket of the National Agricultural Marketing Council (Namc), comparing the average food price data for March 2023 and March last year, the nominal price increased by 10.5% in March 2023 compared to March last year, costing R1 169.49 versus R1 148.38, or 1.8% more monthly.
In March this year, 23 of the 28 food items had price increases that exceeded the South African Reserve Bank's 6% inflation target.
These products include onions (45.0%), maize meal (28.4%), Ceylon/black tea (26.4%), potatoes (26.2%), chicken giblets (22.9%), apples (22.5%), tomatoes (18.9%), instant coffee (18.2%), white bread (18.2%), sunflower oil (17.9%), cabbage (17.5%), brown bread (17.2%), baked beans (17.2%), full cream milk (17.1%), tinned fish (12.5%), brick margarine (12.4%), beef mince (10.9%), individually quick-frozen (IQF) chicken portions (9.7%), white sugar (9.4%), peanut butter (8.6%), bananas (7.3%), eggs (6.9%) and cheddar cheese (6.9%).
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