Paul Makube
South Africa’s consumer continued to breathe a sigh of relief as headline inflation steadied to 5.2% y/y in May 2024 according to Statistics South Africa. Food inflation however decelerated further to 4.3% y/y in May 2024 from 4.4% in April 2024 underpinned by declines in bread and cereals, milk, eggs and cheese, oils and fats, and sugar, sweets, and desserts prices.
However, drilling deeper into the data shows a continued stickiness on the upside for coffee products. Instant coffee (250g) rose by 2.1% m/m and was sharply higher by 30.6% y/y at R63.28. After posting marginal monthly gains in the prior two months, ground coffee or coffee beans (250g) strongly rebounded 4.9% m/m at R105.30 in May 2024 which is 12.7% higher y/y relative to 6.8% y/y in April. Cappuccino prices however slowed to 0.3% m/m in May from 1.5% previously and were 8.2% higher y/y relative to April’s 9.7% y/y at R78.28 (10×18 gram).
This reflects the supply tightness of the raw commodity on the global market as South Africa is a net importer. Arabica coffee prices surged by 24% y/y recently and back near the Russia-Ukraine war-induced record highs of 2022 due to concerns over the continued dry production conditions in Vietnam (robusta) coupled with below average rainfall in the world’s largest arabica coffee supplier, Brazil.
Vietnam’s agriculture department earlier projected a 20% decline in the country’s coffee production to a four-year low of 1.47 million tons. The spill over crisis in the global cocoa market added to increased uncertainty and speculation in the market. Although easing from the 2024 peak recently to US$9,278/ ton, cocoa prices have increased by 121% y/y and a historical high for the commodity. News out of the major cocoa producers is that the supply outlook remains tight with Ivory Coast’s 2023/24 production estimate cut by almost 22% y/y to 1.75 million tons.
Paul Makub is, Senior Agricultural Economist, FNB Commercial. He writes in his personal capacity.
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