Food Price Review: National Agricultural Marketing Council

Agriculture, Land Reform and Rural Development

11 February 2008
Chairperson: Mr M Mohlaloga ( ANC)
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Meeting Summary

The National Agricultural Marketing Council briefed the committee on its role in monitoring food prices, and tabled the results of its most recent Food Price Review report. The briefing set out the international trends, domestic trends and prices across a wide variety of food groups. The relationships between food price inflation in rural and urban areas, consumer price indexes, and general inflation trends were also tabled. The results of the studies in short term food price monitoring were summarised. In the short term it expected that maize and wheat prices would remain high, as would beef and lamb. Dairy products would remain relatively high. NAMC had been instructed to establish a Section 7 Committee to investigate the Wheat-to-Bread Value Chain and develop a turn-around strategy for the industry. Incorrect conduct by retailers in the power-dairy industry would be reported to the Competition Commission. Possible solutions were tabled, and it was noted that government interventions included social grants transfers, food security programmes and zero ratings on certain foodstuffs.

Members questioned distribution prices, differences in prices by retailers, protection of local farmers, and why subsidies were not being used. There was criticism expressed of food security programmes. Further questions addressed why none of the countries to whom South Africa was compared were in Africa, the issue of monetary policies, and the findings of the Competition Commission. Members accepted that the Council had not been mandated to do anything but merely to investigate and make recommendations.

Meeting report

Food Price Review: National Agricultural Marketing Council (NAMC) Briefing
Mr Simphiwe Ngqangweni, Senior Researcher: NAMC, briefed the Committee on an overview of its role in food price monitoring. It had begun its work in monitoring after the food price crisis of 2002, to assist the Department of Agriculture (DoA) to make informed policy decisions. He set out how the monitoring was being done, and said that this monitoring was not only restricted to the urban areas, but also to rural areas, where data collection had commenced from 2006. Staff were seconded from NAMC to Statistics SA, and published cost monitor reports.

Mr Ngqangweni set out the international trends, citing a number of different sources, and said that the reasons for these trends included global shortage of grains, changing diets in China and India, the increase of global meat and milk consumption, the rising affluence of consumers in developing countries and livestock disease.

Domestic trends were then explained, and graphs were presented of general and food inflation trends, and prices across a number of other categories. The relationship between food price inflation in rural and urban areas, consumer price indexes, and general inflation trends were also tabled.

NAMC then set out the results of its studies in the short term food price monitoring (see attached presentation). The factors affecting prices locally were summarised as price movements internationally, including foodstuffs and oil, international agricultural policies, monetary policy and demand factors. On the demand side, there was an increasing population, including migration, increase of basic income grants and changing consumer patterns.

For the future, NAMC suggested that in the short term maize and wheat prices would remain high, as would beef and lamb. Dairy products would remain relatively high. NAMC had been instructed to establish a Section 7 Committee to investigate the Wheat-to-Bread Value Chain and develop a turn-around strategy for the industry. There had been some conduct by retailers in the power-dairy industry that could have negative long-term impacts, and this would be reported to the Competition Commission.

Possible solutions included supply side constraints to increase farmer confidence, investment in research, infrastructure and new production areas, addressing high input cost challenges, and demand of side constraints. Government was dealing with social grants transfers, food security programmes and zero ratings on certain foodstuffs.

Discussion
Ms A Thomson (ANC), expressed that she thought the presenter would have said something about the distribution point prices, which she though were worthy of government intervention.

Ms Ntombi Msimang, Chairperson, NAMC, replied that these differed. The manner in which the price was established in exported products was different to the manner in which it was calculated for domestic products. Farmers exporting a product at times had to pay until the product had reached its intended destination.

Ms Thomson then asked how different retailers came up with the same price on certain food items, but yet they had different costs or overheads.

Prof Andre Jooste, Senior Manager, NAMC, said that there were different ways in which retailers came to a price, and this mostly depended on negotiations between them and the supplier.

Mr A van Niekerk (DA), asked how local farmers were being protected by government, since in the past there were price controls in place. The aim was to boost local production.

Mr Masiphula Mbongwa, Director General, Department of Agriculture, noted that the Department was not able to subsidise farmers due to certain international policies.

Prof Andre Jooste added that subsidising farmers would be seen as jeopardising the market, as it would give rise to surpluses in production and prices would drop. It was for this reason that certain international organs were against the subsidising of farmers.

Mr D Dlali (ANC), said that social grants transfers could never deal with food prices. He further commented that food security programs were in a mess, as there were many departments dealing with them.

Mr Dlali further commented that none of the countries with whom South Africa was compared in the Agricultural Policy Graph section of the presentation were in Africa, and asked why this was so.

Mr Ngqangweni said that the countries that South Africa was compared to in the graphs represented those countries from whom South Africa imported.

Mr Dlali asked the NAMC to elaborate upon the statement that monetary policy was a contributing factor to food price inflation.

Prof Jooste said that the monetary policy was a tool that was used by government to affect spending patterns. The moment people had access to money the more they would spend, and thus food prices were also affected.

Ms C Nkuna (ANC), asked if it was not possible to provide subsidies for farmers in rural areas.

Prof Jooste, responded that South Africa tended against the use of subsidies, as subsidies distorted the world market.

Mr Dlali said that the Council’s finding that there was no foul play in food prices was not true. Tiger Brands had been found by the Competition Commission to be in breach of the Competition legislation.

Mr Ngqangweni said that the “no foul play” observation in the report was submitted by an independent commission, and not by NAMC. .

The meeting was adjourned due to time constraints.

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