1. Food Price Monitoring Report National Agricultural Marketing Council (NAMC) Food Cost Review 2005

2. Outline  The NAMC  Food Price Monitoring (FPM) background  FPM Committee 2003 key TOR  FPMC key findings  FPMC key recommendations  Follow up FPM work: Food Cost Review  Food Cost Review 2005: observations  Latest CPI (Food) figures  Concluding remarks

3. The NAMC  Statutory body: Marketing of Agricultural Products Act (MAPA) 1996  Advisor to the agriculture Minister on agricultural marketing:

4. Background to FPM  Many HH’s in RSA are poor & food insecure  Approx 14 million S. Africans are vulnerable to food insecurity (Stats SA)  In 2001/2002, many HH’s were affected by rising prices of basic foods  Minister established the FPMC in Jan 2003

5. FPMC 2003 Key TOR  Monitor the pricing of basic foodstuffs  Investigate any sharp or unjustified price increases  Determine the competitiveness of production operations  Investigate incidents of predatory pricing and monopolistic tendencies

6. FPMC key findings  Initial sharp increases in basic food commodity prices (notably maize) in 2001/02  In some cases prices increases were far above the current rate of food price inflation (e.g. milk, peanut butter, margarine, onions)  Poor HH’s experienced higher inflation rates than richer HH’s  Prices in rural stores generally higher than in urban stores (in processed goods)  Levelling off & some decline in food prices noticeable in 2002/03

7. FPMC key findings  Subsequent cooling off of prices not as high as initial spikes  NB: lower food price inflation not necessarily translates into cheaper food!  Some evidence of oligopolistic behaviour and monopolistic competition among some food industries  Limited number of competitors, brand loyalty, etc. - dictation of prices by retailers & processors

8. FPMC Key Recommendations  Strategic grain reserves  Direct government programmes  Increasing competition and reduced barriers to entry  SAFEX rules transport and logistics  Improved agricultural information systems  NAMC to continue with food price monitoring

9. FPM follow up work  NAMC to monitor both urban and rural food prices  Publishing of an Annual Food Cost Review & Quarterly Food Price Trends and media release  Urban food price monitoring progressing smoothly  Rural food price monitoring experiencing some challenges

10. Published Documents YearPublication Publication date 2004 Food Price Trends Report: 2000 to 2004 July 2004 Food Price Trends Report: January to December 2004 March 2005 South African Food Cost Review: 2004 July 2005 2005 Food Price Trends Report: January 2004 -April 2005 June 2005 Quarterly Food Price Trends Report: August 2004 – August 2005 October 2005

11. YearPublication Publication date 2005 Food Price Trends Report December: 2004-Decmber 2005 February 2006 South African Food Cost Review: 2005 July 2006 2006 Food Cost Trends Report April 2005-April 2006 June 2006

12. Food Cost Review 2005  Report’s key contents: Food price inflation 1991 – 2005 Food price inflation 1991 – 2005 Trends in retail food prices 2004 - 2005 Trends in retail food prices 2004 - 2005 Methodologies for calculation of farm value & farm-to-retail price spreads & some estimations Methodologies for calculation of farm value & farm-to-retail price spreads & some estimations Trends in prices of marketing inputs Trends in prices of marketing inputs Case studies (tomatoes & onions) Case studies (tomatoes & onions)

13. Food Cost Review 2005  Food price inflation: measure of rate of increase in prices of food items in the “food basket” CPIF for most food commodities in rural areas generally higher than in urban areas (p8) CPIF for most food commodities in rural areas generally higher than in urban areas (p8) Due to transport costs from urban value- adding firms, storage costs, extra labour, business risk, limited supply, etc. Due to transport costs from urban value- adding firms, storage costs, extra labour, business risk, limited supply, etc.

14. Food Cost Review 2005  Farm value: measure of return received by farmers for farm-product equivalent of retail food sold to consumers Dairy Low fat Full cream CheddarCheeseButter FarmvalueR0.90/LR1.48/LR17.20/kgR24/kg Share19.56%33.74%52.68%71%

15. Food Cost Review 2005 Maize meal SuperSpecial Farm value R849.89/tonR674.94/ton Share32.92%30.44%

16. Food Cost Review 2005 ProductUnit % change in retail price Dec 2004 – Dec 2005 White Bread 700g0.5% Brown Bread 700g4.2% Super Maize Meal 5kg-8.8% Special Maize Meal 5kg5.6% CabbageHead13.1% Whole fresh chicken Unit16.2%

17. Food Cost Review 2005  Trends in prices of marketing inputs Very small effect of fuel price on the CPI in both rural & urban areas Very small effect of fuel price on the CPI in both rural & urban areas Price of packaging material initially increased (2002) but eventually levelled off by 2005 Price of packaging material initially increased (2002) but eventually levelled off by 2005

18. Latest CPI Food figures  CFI Food in April was 6.2% (up from 4.4% in January( (Stats SA)  Prices for the following food items increased by more than 6% (year on year in April 2006): Super & Special Maize Meal Super & Special Maize Meal Beef, mutton, chicken Beef, mutton, chicken Sugar Sugar Rice Rice

19. Concluding remarks  Poor consumers especially in rural areas have suffered the most from the price hikes of 2001/02  Subsequent levelling off has not been fully realised by consumers  Opportunity for price dictation by processors and retailers detected  This issue will be subject of further research by NAMC’s Markets & Economic Research Centre  The findings will inform the work of the Competition Commission