20260623
By Paul Makube, Senior Agricultural Economist, FNB Commercial
23 JUNE 2026: South Africa's headline inflation accelerated faster than expected by 1.5 percentage points from May to 5% year-on-year (y/y) in June 2026 driven by price expansions in transport (+12.7% y/y), housing and utilities (+5.5% y/y), and insurance and insurance services ( +5.9% y/y), according to Statistics South Africa. Monthly, headline steadied at 0.7% month-on-month (m/m) in June 2026.
In contrast, food inflation decelerated further to a 15.5-year record low of .4% y/y as the bumper harvest and supply recovery in livestock continued to weigh heavily on prices for grains, fruit, vegetables, and meat, respectively.
On the back of a 5% y/y increase of the summer crop harvest to a record 21.5 million tons, cereal products remained in a deflationary mode since the beginning of the year at -1.5% y/y in June with no monthly pressure. The bullish global supplies and a stronger rand exchange rate continued weigh heavily on domestic grain and oilseed prices which underpins this deflationary trend.
Globally, the Cereal Price Index as measured by the United Nations' Food and Agriculture Organization (FAO) fell by 3.5 % m/m in June with declines in wheat and maize prices by 4.4% and 6.2% respectively on the back of ample supplies prospects from the Black Sea region and South America.
The "fruits and nuts" and vegetables categories remained in a nine- month deflationary trend at -10% y/y and -3.5% y/y, receptively. 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% m/m from 0.9% previously, "fruit and nuts" remained in deflation for the second consecutive month at -14% m/m 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 the rebound in supplies in the livestock market. 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.
Overall, food inflation has so far survived the Middle East war- induced energy shock with fuel price inflation surging to 34.3 y/y and 4% m/m 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.
