By Thebe Mabanga

But, the report released by the National Agricultural Marketing Council on Friday, finds that: "The long-term trend in food prices shows that there are no abnormalities in the increases".

While prices have increased in rand terms in the year to March, when adjusted for inflation, the increases since January 2003, are bearable.

Moreover, the report disputes the claim that food is taking a bigger chunk of the country's consumer spending.

The findings seem to jar with general experience and will rile observers such as unions and consumer groups.

The report found that, of 66 food items, 10 actually showed a price decrease, while 34 items increased by more that 6%, the upper limit of the country's inflation target.

Food items showing a decrease in price include cauliflower, which has fallen by 49.36% in the year to March; potatoes (24.49%); cheddar cheese (14.36%); and Granny Smith apples (6.18%).

Items registering sharp increases include some kinds of maize meal which was up 31.5%, lamb chops (26.34%), frozen chicken (33.84%) and apricot jam (16.5%).

A crucial statistic in the report suggests that the activities of futures traders may warrant scrutiny. Speculators in a futures market buy and sell commodities for delivery on a future date.

The report shows dramatic rises in the prices of wheat, maize and sunflower, which are traded on the South African Futures Exchange (Safex).

The price of Safex wheat rose from R1409.30 a ton in March 2006 to R2051.54 in March this year, an increase of 45.6%. The price of Safex maize has risen by 71% over the same period, while Safex sunflower has risen by 58.6%.

The council found that, in nominal terms, a basket of food items had risen from R253.85 to R288.52, an increase of R35 or 13.7%, in the year to March.

The report disputes the view that is gaining currency, most notably from groups like the trade union Solidarity, that food prices are taking an increasing chunk out of consumers' pockets.

The report uses the same basket of goods and measures it as a proportion of a minimum wage of R1,000 in 2003. It shows that in 2003 the basket accounted for 25.4% of consumer earnings. The figure currently stands at 22.2%, with the minimum wage adjusted.

The report then notes: "The intention of this analysis is not to show that workers are better off, but rather to show that agriculture is still succeeding in its goal to provide profitable, affordable food to the population of South Africa."

Thami Bolani, chairman of the National Consumer Forum, disputed the report's findings on the impact on consumer spending and has instead called for "something drastic" to be done about food prices.

He said the forum's experience has been that food costs are taking more and more out of consumers' pockets.

Bolani called for the investigation recently announced by Land Affairs and Agriculture Minister Thoko Didiza to include farmers and consumer bodies, and to be broadened to include the activities of speculators.

Bolani also suggested that government should look into subsidies or price caps for basic goods.

The National Agricultural Marketing Council said it now plans to investigate the contribution of agro-processing companies and retailers to the increased cost of food.

The present imbalance in the supply and demand for milk and dairy products is expected to be eliminated soon, according to the SA Milk Processors' Organisation (Sampro).

Sampro added that a number of factors had caused the shortages.

Production of raw milk traditionally declines between January and the middle of the year, but was aggravated this year by extremely hot weather which reduced production by cows. There has also been further pressure on farmers' input costs, such as for maize. According to the National Agricultural Marketing Council's survey, consumer prices of milk and other dairy products declined as a group over the past 24 months to December last year, although those of other food products increased.

The fact that milk and dairy prices were lower than prices of other food groups had a favourable impact on the demand for milk and dairy products, but did not stimulate the production of raw milk by dairy farmers, it added. The shortage experienced locally coincided with an international shortage, mainly in EU countries, but also in Australia where prices have increased, the council said. - with additional reporting by Don Robertson

Business Times