1. Food price monitoring as a policy-relevant indicator of diverse food access Presented by: Christo Joubert Manager: Agro Food Chains & Knowledge Management MERC

2. Table of content Background. Why do we need to monitor food prices? A typical NAMC FPM report SA food prices. Global supply and demand & prices. Evolution of long-term trends contributing to higher prices. Short term factors that may influence future agric prices. Longer-term factors expected to influence future agric prices.

3. Background Depreciation of ZAR in 2002 result in: –Increasing in agric commodities & input cost –Increasing food prices + volatility –Understand the relationship between food, exogenous and endogenous variables. –This led to the establishment of the: Food Price Monitor Food Cost Review Input Cost Monitor Trade Flow Supply & Demand Estimates

4. Why do we need to monitoring systems? Because: The impact of high food prices at a country level includes, amongst others, the following: –Social unrest and food riots. –Panic buying by some net importing countries to secure adequate supplies and build domestic stocks of major cereals – “Great grain robbery” –Widening current account deficits for net importing countries. –Threat to macro-economic stability and overall growth, especially of low-income, net-importing countries. –More food insecure households and hence increased pressure on governments to expand their social welfare programmes.

5. A typical FPM Foreword Overall inflation and food inflation: South Africa and selected countries Urban and rural food price trends: July 2012 – July 2013 Comparison between urban and rural prices Price trends International food prices Estimated impact of food inflation on consumers September 2013– November 2013 outlook APPENDIX A: DATA ON URBAN FOOD PRICE TRENDS APPENDIX B: DATA ON RURAL FOOD PRICE TRENDS APPENDIX C: SUMMARY OF INFLATION FOR SELECTED FOOD ITEMS BETWEEN JULY 2012, APRIL 2013 AND JULY 2013 APPENDIX D: COMMODITY AND PRODUCT PRICE TRENDS APPENDIX E: REAL FARM TO RETAIL PRICES SPREAD AND FARM VALUE SHARE OF STAPLE FOOD ITEMS APEENDIX F: DATA COLLECTION

6. South African food prices: Aug 2013

7. South Africa vs. global inflation trends Aug 2013 Country Overall inflation (%) (April 2013) Inflation of food and non alcoholic beverages (%) (April 2013) South Africa 6.46.8 Botswana 5.74.7 Zambia 7.37.1 Turkey 8.812.7 Namibia 5.86.3 United States 1.91.4 United Kingdom 2.83.9 Brazil 6.311.4 Russia 6.54.9 India 5.811.9 China 2.65.0

8. Comparison between urban and rural food prices (selected food items) Product Rural food prices (R)Urban food prices (R) Price difference (Apr-13) Price difference (Jul -13) April-13July-13April-13July-13R/unit Full Cream Long Life Milk 1L 10,6111,7410,9310,7−0,321,04 Loaf Of Brown Bread 700g 8,028,469,049,16−1,02−0,70 Loaf Of White Bread 700g 9,289,3810,1110,25−0,83−0,87 Maize Meal 5kg 31,1331,4629,7623,731,377,73 Margarine 500g 25,5420,2716,4916,119,054,16 Rice 2kg 23,6223,0821,0121,512,611,57 Sunflower Oil 750ml 15,6015,4317,0217,2−1,42−1,77 Ceylon/Black Tea 62.5g 6,50 8,008,14−1,50−1,64 White Sugar 2.5kg 26,4027,3624,6525,421,751,94 9,6911,46

9. Estimated impact of food inflation on consumers

10. Nominal monthly cost of specific groups in the basic food basket (Jul 2012 & Jul 2013)

11. 5 Year % change: Nominal & Real Bottom changersTop changers

12. 5 Year % change: Average Nominal & Real Bottom changers Top changers

13. Global supply and demand & prices Long-term trends & short-term shocks contributed in different ways: Long-term trends in supply and demand have led to gradually tightening world markets since late 1990s – and to upward trending prices since 2002. The resulting reduced global stocks and stocks-to-use ratios set the stage for:  Short-term shocks & disruptions to further restrict world food commodity supplies leading to policy responses that raised short term demand and led to price spikes in 2007/08 and 2010/11.

14. Evolution of long-term trends contributing to higher prices Developing country economic and population growth led to increased food demand –Growing middle class, increased urbanization, diet diversification Slower growth in agric productivity Depreciating U.S. dollar Higher crude oil prices Biofuel production: USA, EU, BRAZIL, ARGENTNA, CANADA, etc. Increased demand for biofuel and feedstock Above factors led to an upward trend in food commodity prices, but did not directly cause the price spikes

15. Short term factors that may influence future agric prices Weather Stock levels (Supply & demand balances; stocks policies; self-sufficiency policies) Policy changes by food commodity exporters & importers Exchange rates (mainly for commodities exchanged in US$) Energy & other non agric prices / Agric production costs Extent of global economic recovery Import demand: Who will be the importers? (Role of foreign exchange reserves)

16. Longer-term factors expected to influence future agric prices Biofuels production (Influence of oil prices; Role of policies) Food consumption patterns (Continued income-driven increase in per capita meat consumption ?) Technology advancements –Continued slowing of growth in productivity? –R&D investments. –Role/acceptance of GMO products. Natural resource constraints –Land: Ability to expand cultivated area; productive capacity of new land –Water: Ability to continue rate of growth in irrigated areas Climate change –Impact of temperature, precipitation, and seasonal changes in cropping patterns & productivity. Variability.

17. Contact details: Christo Joubert Tel: 012 341 1115 Fax: 012 341 1811 E-mail: christo@namc.co.zachristo@namc.co.za Website: www.namc.co.zawww.namc.co.za Acknowledgements to other NAMC staff for assistance to prepare FPM and this presentation: This presentation would not have been possible without the contributions from various organisations and individuals. The NAMC would like to thank them for their willingness to assist with this very important programme. Thank you 17 Disclaimer: Information contained in this document results from research funded wholly or in part by the NAMC acting in good faith. Opinions, attitudes and points of view expressed herein do not necessarily reflect the official position or policies of the NAMC. The NAMC makes no claims, promises or guarantees about the accuracy, completeness or adequacy of the contents of this document and expressly disclaims liability for errors and omissions regarding the contents thereof. No warranty of any kind, implied, expressed, or statutory, including but not limited to the warranties of non-infringement of third-party rights, title, merchantability, fitness for a particular purpose or freedom from computer virus is given with respect to the contents of this document in hard-copy or electronic format or in electronic links thereto. Any reference to a specific product, process or service by trade name, trademark, manufacturer or other commercial commodity or entity is for informational purposes only and does not constitute or imply approval, endorsement or favouring by the NAMC.