There is likely little concern for any lasting effects from the pandemic’s initial impact on the market, at least for the products considered by the Competition Commission in its second quarterly report on Essential Food Pricing.

The first two reports seem to suggest that all food products showing a pricing spike also showed prices easing afterwards although the Covid-19 pandemic came with some “short-term pricing effects at a wholesale level, particularly on essential food products”.

Data from the Johannesburg fresh produce market and StatsSA suggest little concern for any lasting pricing effects from the pandemic’s initial impact on the market, but there is some concern about retailers and retail markets.

The commission’s analysis indicates that the margins retailers earned on the producer price have increased substantially during lockdown almost entirely due to increases in retail prices, at least for more essential products such as potatoes and onions.

Another concern for the commission was that an examination of margins over time shows when costs decrease, prices tend to come down more slowly, especially since retail prices for these products had yet to return to normal levels by June 2020, with margins still elevated. The commission will keep an eye on these margins to see if an investigation is necessary.

The commission also noticed that pricing varies significantly across the country’s fresh produce markets, with the differences not explained by the market size or logistics costs. According to the report the commission is concerned about these significant variations in pricing without an understanding of the factors involved and it will consider these dynamics to determine if the markets are malfunctioning.

Price volatility will also be considered to see if some markets are more susceptible to manipulation than others due to a lack of liquidity.

The good news is that the grain commodity markets showed some stability returning after initial pricing effects due to the depreciation of the rand during lockdown period.

Article Source: https://citizen.co.za/business/business-insight/2362246/competition-commission-worried-about-food-price-hikes-during-lockdown/