If the weaker rand/dollar exchange persists, South Africa could contend with noticeable upside pressure on the prices of imported food products, says Agricultural Business Chamber chief economist Wandile Sihlobo.
He said on Monday that such a product whose prices were already high in US dollar terms and South Africa imports large volumes of it was rice.
“Global rice prices have continued to surge because of constrained supplies in the 2022/23 production season and robust consumption-levels. In May 2022, rice from various origins, such as Thailand, Vietnam, India, and Pakistan, traded below $400 per tonne. But in May 2023, except for India, these rice price origins traded over $500 (R9 697) per tonne,” Sihlobo said.
Agbiz said importing countries now faced increasing pressure. South Africa imports roughly 1.1 million tonnes of rice annually, and the 2022/23 volume remained unchanged from the last season. The 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 expected to moderate in the second half of the year, consumers may reduce their rice consumption if its prices remain elevated this year,” he said.
In its Daily Market Commentary on Monday, Nedbank CIB research analyst Reezwana Sumad said the rand recovered moderately, despite a broadly improved dollar as US jobs growth exceeded expectations.
With that said, Sihlobo said they still believed the global rice price increase should be temporary.
He said the International Grains Council forecast a 2% recovery in global rice production in the 2023/24 season to 521 million tonnes.
“The increase expected is predicted across all key producing countries such as India, Vietnam, Thailand, the US, Pakistan, China, Indonesia, and the Philippines. The production recovery is due to anticipated favourable weather conditions and yield improvement.
“With stocks in the same season set to improve by 1% to 173 million tonnes, the price moderation in global rice prices (was expected) at the end of 2023 and into 2024,” he said.
The likely supply surge meant prices could soften going into 2024, thereby benefiting cash-strapped South African consumers, assuming the rand/dollar exchange improves from its weaker levels.
Meanwhile, Agbiz said there was a generally held view that South Africa would likely transition into an El Niño state in the upcoming 2023/24 summer season. However, the intensity of it, its duration, and its impact on crop production remained uncertain.
“Still, South Africa can be expected to have a smaller harvest compared with the past four years of consecutive ample harvests of field crops and horticulture. A critical factor to note is that the expected El Niño comes after four straight seasons of solid rainfall and good soil moisture.
“Therefore in the event of a weak El Niño state, the current soil moisture conditions could support crop conditions and ensure another reasonably decent harvest as in 2018/19, which was also an El Niño period. Notably, the season before 2018/19 was not even as favourably wet as the past four seasons. We will have a much better view of the expected El Niño intensity in two to three months, which will also be closer to the summer crop planting.”
Sihlobo said that positively, with all the fears about the prospects of the upcoming drought, the winter crop-growing regions across the country had received reasonably good moisture, which would support the crop. As the winter season continues, there was likely to be additional rainfall in the Western Cape and coastal regions, all of which would support winter crops, wine grapes, and various horticulture.
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