Good grain harvest shielded South African consumers from inflation reality

For months I have been speaking about how excellent an agricultural season we have had in 2025/26, the benefits of which are also shown in the slowing of consumer food price inflation.For example, data released by Statistics South Africa on 23 September 2026 showed that consumer food price inflation was 0.7% in August 2026, up from 0.6% the previous month. These levels in July and August 2026 are still the lowest since 2010.Consumer food price inflation is likely to remain at these moderate levels for the rest of this year and may tick up next year as fears of the expected El Niño drought start to show in various food product prices. Base effects will also drive up consumer food price inflation in 2027.The key products keeping consumer food price inflation at these lower levels are mainly grain-related, fruits and vegetables, which are all currently in deflation.Meat price inflation has also continued to moderate, suggesting slaughtering activity remains steady. However, fears of foot-and-mouth disease have added upside pressure on red meat prices over the past few months.The only products that nudged up in August were fish and seafood, milk, dairy products and eggs. Still, these products have lower weighting and therefore are not materially increasing the headline food price inflation figure.Food and non-alcoholic beverage inflationIf we zoom in on the key products, cereal products are in deflation, as we are in yet another year of better grain production. South Africa’s summer grains and oilseeds production is forecast at a record 21.6 million tonnes, up 5% from the 2024-25 season. This figure comprises maize, sunflower seed, soybean, groundnuts, sorghum and dry beans. This ample harvest adds to already large stocks from the past season, keeping grain prices under pressure.Similarly, fruit and vegetable prices are trending lower. Clearly, while the recent floods are destructive in parts of the Eastern and Western Cape, the country’s fruit harvest remains ample and continues to exert downward pressure. Vegetable production conditions remain broadly favourable.Regarding meat, the pace of cattle slaughter has declined somewhat, though not notably. Another factor to keep in mind is that during foot-and-mouth disease outbreaks, the country is typically temporarily closed to some export markets, increasing domestic supplies even if slaughter has declined somewhat.Base effects on meat prices, along with continued cattle slaughter, have helped ease price inflation. Poultry production conditions are also favourable.The 2025-26 agricultural season isn’t without challengesOf course, this optimistic agricultural harvest doesn’t mean we had no challenges. We certainly did. It also doesn’t mean that all agricultural commodities and value chains had a good run in 2025-26. They certainly didn’t.For example, we ran into inefficiency challenges at the Port of Cape Town, although we continue to make admirable progress on exports. The producers that typically send their agricultural produce through the Port of Cape Town had to shift some volumes to the Eastern Cape.Still, this coordination helped ensure the country maintained solid agricultural exports. For the first half of 2026, South Africa’s agricultural exports amounted to $7.8-billion, up 11% from the first half of 2025.Still, had the Port of Cape Town not experienced inefficiencies that forced farmers and some agricultural exporters to move produce to the Eastern Cape, profitability would likely have been much better, and the produce would have reached buyers in even better condition.In terms of commodities with challenges, the livestock industry, specifically cattle, continues to face foot-and-mouth disease challenges. Indeed, we are making progress with vaccination, but this has been the sector’s major challenge since the start of the year and has led to subpar performance in this subsector.The wheat industry has also had a challenging start to the 2026-27 season because of higher input costs and drier weather conditions, among other issues. As a result, South Africa’s 2026-27 winter wheat production estimate is 1.8 million tonnes. This is down 8% from the previous season and is the lowest expected harvest in eight years.The path ahead in consumer food price inflationSetting these challenges aside and looking at the consumer food price inflation path, I still worry that the US-Iran war remains the major near-term risk and is likely to drive higher fuel costs. Fuel accounts for a substantial share of food distribution costs. Notably, more than 80% of staple food products are transported by road.In the medium term, the forecast El Niño drought is a concern, but it may only affect the direction of 2027 food price inflation, as it affects next season’s crop, which will be planted from next month, mid-October, and come to market in mid-2027.For now, however, South Africans continue to benefit from the ample agricultural harvests of the 2025-26 season. DM