Food Inflation Slows To 15.5 Year Low Driven By Bumper Harvests And Global Supply

In contrast, food inflation decelerated further to a 15.5-year low of 1.4% year-on-year as the bumper harvest and supply recovery in livestock continued to weigh heavily on prices for grains, fruit, vegetables, and meat, respectively.

Grain production and global commodity trends

On the back of a 5% year-on-year increase in the summer crop harvest to a record 21.5 million tonnes, cereal products remained in a deflationary mode since the beginning of the year at -1.5% year-on-year in June with no monthly pressure. Ample global supplies and a stronger rand exchange rate continued to weigh heavily on domestic grain and oilseed prices underpinning this deflationary trend.

Globally, the Cereal Price Index as measured by the United Nations’ Food and Agriculture Organization (FAO) fell by 3.5% month-on-month in June with declines in wheat and maize prices by 4.4% and 6.2% respectively on the back of ample supply prospects from the Black Sea region and South America.

Fresh produce and livestock recovery

The “fruits and nuts” and vegetables categories remained in a nine-month deflationary trend at -10% year-on-year and -3.5% year-on-year, respectively. This reflects the abundant supplies due to favourable production conditions despite the ravaging floods in parts of the Eastern and Western Cape

While monthly pressure was a bit stronger for vegetables at 2.7% month-on-month from 0.9% previously, “fruit and nuts” remained in deflation for the second consecutive month at -14% month-on-month in June.

Meat inflation slowed further for the fifth consecutive month to a 13-month low of 5.1% y/y on softer seasonal demand and improved livestock supplies. The easing of disease-related disruptions from foot-and-mouth disease (FMD) in cattle and African Swine Fever (ASF) in pigs helped improve availability. Monthly pressure was just 0.1% for meat inflation.

Energy risks and long-term weather outlook

Overall, food inflation has so far survived the Middle East war-induced energy shock with fuel price inflation surging to 34.3% year-on-year and 4% month-on-month in June. Nonetheless, the renewed escalation in the Middle East conflict remains an upside risk to cost pressures in the agriculture sector as about 80% of food distribution is done by road.

The combination of potentially higher energy costs and renewed interest rate hikes will continue to erode disposable incomes and weigh on demand prospects. While the El Niño weather pattern is almost certain for 2026/27, it has yet to be priced into commodities and is expected to exert inflationary pressure only in 2027.