Editorial: Rain can provide marginal relief
Consumers could be in for some respite this year if the anticipated rainfall arrives in the next few months.
Much is depending on it, not least our inflationary outlook, which takes its cue from the annual maize crop, to a large extent.
Last year’s drought was devastating for the country. Maize was imported to make up for the massive shortfall in the local harvest.
These input costs were passed on to ordinary people through higher prices at the till. Animal products which require feedstock shot up, although beef suffered less from the price shocks because desperate farmers slaughtered their herds, pushing more supply into the market.
Chicken producers, however, took a serious knock.
Poultry giant Astral, for instance, declared 2016 one of the most difficult in its history, noting that “our biggest input cost factor, yellow maize, rose spectacularly to over R4 000 a ton due to severe drought”.
Since food makes up a large portion of the inflation basket, it stands to reason our economic fortunes are somewhat contingent on what we eat. The Reserve Bank was forced to raise interest rates because inflation stubbornly remained above its upper 6% target band.
That meant less in our pockets to spend, the outcome of which left a number of non-food retailers and other sectors like healthcare under pressure.
In fact, the entire economy took a bath, with growth barely registering in positive territory.
Good rainfall in the coming weeks and months could change all that.
Crop estimates are due on Thursday and will hopefully provide a clearer picture. Some optimists are banking on a near-doubling of last year’s 7.6 million ton maize crop.
Ultimately, this will go a long way towards easing inflation, giving the central bank ammunition to contemplate interest rate cuts.
Such rate relief, however, would not be immediate. In truth, we may only see the benefits in the second half of the year.
Grain SA, while pleased with current conditions, is urging caution. Anything could still happen.
For now, we are not out of the woods.