Food prices edge up on SA drought
Isaac Pinielo | Friday March 27, 2015 15:47
This comes on the back of drought in South Africa that has shrunk the SA crop by almost a third, leading to an increase in maize meal prices. Botswana imports about 95 percent of its white maize from South Africa.
It was reported that maize prices in Botswana had increased by up to 40 percent since December last year and that the market should expect further increases in the price of finished products from this month.
Sefalana Holdings’ group finance director, Mohamed Osman said they are already seeing an increase in the prices of maize-based products, noting that the prices will inevitably increase for these products throughout the market.
“We are about to commence production of our own in-house maize meal and where possible we have procured maize at favourable prices so that we can delay passing on the price increase to our customers,” he revealed. Osman also explained that this is an expected exposure to a commodity-based product range, adding that unfortunately this is unavoidable in a market that is based on supply and demand.
He pointed out that in some years, prices will be pushed up while in others they will fall, adding that other food prices are not significantly impacted by commodity prices so the same level of knock-on price changes are not expected. With the low inflation and a drop in fuel prices, Osman stated that prices of products sold in their stores are generally not expected to increase significantly in the short to medium term. He said in the long term, the movement in prices will depend on a number of factors, yet it is not easy to predict. “Generally though, prices of products will shift in our stores to a similar level to our competitors,” he said.
Bokomo Botswana, distributors of White Star Super Maize Meal and Bokomo Special Maize Meal, among other products, said maize meal prices have already started to increase due to the drought in SA. Bokomo national sales and marketing manager, Victor Khan said the reduction of more than 30 percent in the SA crop will force prices up. He said the short-term increase since December is already in the order of 37 percent.
“Maize meal prices already started to increase and will follow maize raw material price trends throughout the year ahead,” he said.
The Botswana Agricultural Marketing Board (BAMB) spokesperson, Kushatha Modiakgotla noted that maize prices or any commodity are regulated by the law of supply and demand.
She said the prices are also influenced by substitute commodities like sorghum and wheat.
“Currently, we have witnessed a high volatility of white maize prices both upwards and downwards. We monitor this developments on a daily basis as our pricing structure is import parity,” she said.
According to Modiakgotla, annual maize consumption in Botswana is about 140,000 metric tonnes, but the country only produces about 30,000 metric tonnes. She stated that it is difficult to estimate the maize prices given the volatility expressed with the South African Futures Exchanges (SAFEX) prices in the past two weeks. The lat time BAMB imported sorghum was in 2013. Modiakgotla stated that they will only consider importing basing on what they would have purchased from local farmers. The Maize and Wheat Millers Association (MWMA) had cautioned that the market is likely to see high maize meal prices for the next 12 months.
MWMA also warned the market on the likely increase in the price of maize chop (animal feed) to the beef sector.