Droughts, mergers and input costs are expected to push up food prices in the coming months, economist Mike Schussler said on Friday.
"The major impact on the food price now is not just the seed prices but the fact that when the food prices do come down, the maize prices are not going to go down because of the huge, other input costs which are going up," he said in Johannesburg.
Schussler was briefing media on his latest report on the current state of food prices and threats to the food sector.
He said the current drought in the United States had already pushed maize prices up, as the US was the largest maize-growing region and the world's major exporter.
At present, the SA maize price was 44.4 percent higher in the first seven months of 2012 compared to the first seven months of 2011.
He said that input costs such as electricity, fuel and labour would still cause high food prices in South Africa, even when the US drought was over.
Electricity prices were likely to continue to increase by about 15 percent and employee costs were rising at about eight percent per year in the agricultural sector.
Schussler said seed, the second-highest input cost for farmers, could go up because of the proposed merger between American seed company Pioneer Hi-Bred and South African company Pannar Seed.
The merger has been the subject of litigation involving the Competition Tribunal and Competition Commission, which blocked the merger before their decision was overturned by the Competition Appeal Court (CAC). The commission is now seeking leave to appeal at the Supreme Court of Appeal against the June CAC ruling.
The merger was expected to increase the price of seed by up to 12 percent. This could be on top of the average price increase of seed in South Africa which was 18 percent, Schussler said.
If these increases in seed prices took place, the price increase of seeds over the next year could easily be in the region of 30 percent, he said.
"The fact that two multinational firms are likely to benefit by between R189 million and up to R300 million at the expense of the South African consumer makes this a perfect storm."
Schussler said seed costs were higher than direct labour costs or fuel costs.
"The poorest of the South African consumers will be the hardest hit, because they spend 40 percent of their income on food."
The high income groups spent 10 percent on food while the middle class spent 20 percent of their income on food.
He said that the increase on the price of maize would affect meat prices.
"If maize goes up, meat prices also go up."
This would result in increases in the price of chicken, beef and dairy products.
"Even your pet food will rise."
Other factors also affecting the agricultural sector were that farmers were currently making a low profit of 4.4 percent and the sector was shrinking.
The number of agricultural workers declined from 1.3 million in 2000 to 638,000 in 2012. Farming units had also decreased from 58,000 in 1993 to less than 40,000 in 2007.
He said that animal producers, who made up 40 percent of SA agriculture, were unlikely to get the same price increases as grain producers, due to the drought.
"But in both cases the farmer remains under pressure as the input costs of both are rising."
Grain farmers were likely to pass on much of the increases now as maize and wheat prices were both high as result of the US drought.
Schussler said animal producers were more likely to feel the pinch as their biggest single input cost increased.