The Competition Commission has expressed concern about unfair price increases for essential food items, which include sunflower oil, white and chocolate bread and cornmeal, as well as frozen chicken parts, one of the most affordable sources of protein. According to the commission’s latest Essential Food Pricing Monitoring (EFPM) report covering food prices from 2021 to 2022, food prices continue to rise and are vulnerable to shocks even though the effects of the pandemic in many markets have subsided. One of the supply shocks is the war in Ukraine that has disrupted global grain prices…
The Competition Commission has expressed concern about unfair price increases for essential food items, which include sunflower oil, white and chocolate bread and cornmeal, as well as frozen chicken parts, one of the most affordable sources of protein.
According to the latest commission Essential Food Price Monitoring (EFPM) report covering food prices from 2021 to 2022, food prices continue to rise and are vulnerable to supply shocks even though the effects of the pandemic in many markets have subsided.
One of the supply shocks is the war in Ukraine that is disrupting the global grain value chain and in South Africa, worsening blackouts are affecting the day-to-day operations of businesses in the food value chain, the commission said.
The commission will start monitoring food prices in 2020, to identify and prevent price increases. This is the eighth report on food prices and the commission says the food sector remains a priority as poor consumers spend a significant portion of their income on essential foods.
The report shows features in some food markets and value chains, such as greater differences between what farms pay and what they sell in stores, increasing profits at the processor and retailer level and potential opportunistic price behavior for staple foods. products, such as bread and cooking oil.
READ ALSO: Inflation on the rise: Food prices hit highest level since 2009
The price of sunflower oil
The commission’s analysis of sunflower oil prices across the value chain in August last year led the commission to investigate the prices of various food products including bread, cooking oil, maize flour, rice, flour, margarine and pasta at retail and wholesale levels.
In addition, the commission launched the Fresh Produce Market Inquiry to assess whether there are features in the market that hinder competition.
The August 2022 edition of the report focuses on sunflower oil prices after consumers expressed concern about a sharp price increase. The commission found a significant increase in the price of flower oil producers from March 2022, which was sent to the retail price.
However, retailers appear to have absorbed some of the increase resulting in lower retail margins from March 2022. Then, from June to December 2022, the wholesale price of sunflower oil fell sharply from R32.72 to R23.88.
Also Read: Competition Commission begins investigation of fresh produce market
The commission said that the spotlight on the cooking oil processor’s actions in the report may have contributed to this decline and that the company remains under investigation. Meanwhile, the retail price dropped from R45.33 in July to R38.71 in December 2022.
A higher decline in wholesale prices than retail prices caused the retail margin to increase to 38% in December from 22% in March 2022.
The commission said that retailers’ rapid increase in percentages means that consumers are not yet aware of the relief that wholesale prices will bring.
The percentage margin may be the same as in 2021, but higher wholesale prices mean that retailers are taking more rand margin than before, which is not justified, the commission said, adding that the net effect of the actions of processors and retailers in 2022 is. consumers are still paying more for cooking oil than they were in 2021.
The Commission remains concerned about prices in the cooking oil value chain and is currently conducting a formal investigation.
READ ALSO: Inflation eased, but food prices rose to a 14-year high
Prices of bread, corn, fruits and vegetables
The latest edition of the EFPM report shows:
- The price of white bread increased by 20% and the price of brown bread by 19% from January to December 2022, faster than the producer price which increased by 15% for white bread and 14% for brown bread. This implies an increase in the shelf price of R15.47 to R18.62 for white bread and R13.99 to R16.61 for brown bread, which may not be justified by the cost.
- The price of maize meal increased by 32%, from R26.62 to R35.29 from January to December 2022, while the price of white maize on the South African Futures Exchange (SAFEX) increased at a slower rate, affecting the prices charged to farmers. corn makes up a lower proportion of the retail price of corn. The Commission has expressed this and may indicate opportunistic behavior throughout the value chain. This also raises questions about the use of export parity prices throughout the maize value chain.
- The prices of the five fruits and vegetables are generally volatile during 2022 and the Fresh Produce Market Investigation will conduct an in-depth value chain analysis.
READ ALSO: The Competition Commission has launched an investigation into the fresh produce market
Price per serving of quick frozen chicken
This edition of the EFPM report has a special focus on the feed-to-poultry value chain, specifically quick-frozen (IQF) chicken products that are considered an affordable source of protein for low-income consumers.
The commission said feed costs account for more than two-thirds of broiler production costs and are, therefore, a source of rising costs and price pressures throughout the poultry value chain.
The feed-to-poultry value chain is highly concentrated with five companies making up 70% of total chicken production and the top two companies making up 50% of the market.
Some findings on the poultry value chain include the prices of grains and oilseeds used to produce animal feed, namely wheat, corn, soybeans and sunflower oil, volatile and increasing over 2021 and 2022. Poultry feed prices are relative. stable at the same time.
The commission said that raw material cost estimates could decrease during the first half of 2023 and will monitor the rate and extent of the reduction transmitted to feed prices and ultimately to chicken prices at the retail level.
In addition, the commission noted that feed prices have risen faster than producer prices for quick-frozen products, which are the most consumed chicken products in South Africa. Despite this cost pressure, producers reported an improvement in financial performance mainly driven by high feed prices.
The report also noted that when chicken imports from the European Union were banned in response to an outbreak of bird flu on the continent, prices for domestic producers rose. The commission said that this anomaly requires further interrogation and will closely monitor developments in the poultry sector to ensure that consumers are not subjected to unfair price increases.