The Russia-Ukraine conflict has seen a rise in the prices of several key soft commodities – including wheat, for which both countries account for a third in terms of global exports.
There are concerns that local food price inflation could pick up further with all the agricultural cost pressures, including higher fertilizer and fuel prices.
Russia and Ukraine have historically served global markets with key commodities, which include wheat and fertilizers.
Russia remains a key exporter of oil and gas, which are key to driving economies. But the conflict, now in its second month, is expected to create market ructions globally and locally, with key commodity prices on the rise. There are concerns that agricultural cost drivers will put upward pressure on food inflation.
Inflation is a global problem and SA is not exempt: SARB
February’s food price inflation level stood at 6.4% up from 5.7% in January.
Absa does expect that food inflation will remain under upward pressure but doesn’t believe it will necessarily be a long-drawn pain. Senior Economist at Absa agribusiness Dr Marlene Louw says. “We do get a sense that input supplies, prepare for it by knowing what is happening.”
“Hopefully, we will see a good production response to the very high food commodity prices from the northern hemisphere – from places like the US, which would then serve to bring those commodity prices down and that would then filter through into retail prices as we go into.”
In the immediate term, however, general price pressures are set to continue and it’s believed that the Reserve Bank is likely to add to consumer pain by raising interest rates yet further at its next meeting in May. This, following its raising of rates by 25 basis points in November, January and in March.
