South African farmers are about to plant their summer crops, and the weather forecast is not friendly. A strong El Nino is building in the Pacific Ocean, and it could bring a hotter, drier summer to much of the country. That could push up the price of food. The good news is that South Africa starts the season with some protection. Here is a simple look at what is happening and what it could mean for your household.
What is El Nino, in simple terms?
El Nino begins far away from our farms. It happens when water in the central and eastern tropical Pacific becomes unusually warm. This changes the way air moves around the planet.
The effects are not the same everywhere. Some regions get heavier rain. Southern Africa usually becomes hotter and drier.
The South African Weather Service has warned that the current event could become one of the strongest in living memory. It expects hotter and drier conditions across much of the country. You can follow official updates on the South African Weather Service website.
There is one important point to remember. A strong El Nino does not automatically mean a severe drought in every country. Local conditions matter too, and so do temperatures in other oceans. That means nobody can say for certain how bad the summer will be.
Why the timing worries farmers
The timing is the real problem. Maize and other summer crops need good rain in the coming months. Long spells of heat can also damage plants that are already short of water.
Farmers have other pressures as well. Fuel and fertiliser costs are higher, which makes planting decisions harder. Before a single seed goes into the ground, a farmer has to weigh the cost of planting against the risk of a poor harvest. It is not an easy choice.
South Africa has some cushion
The country does not enter this season empty handed. According to investment commentary by portfolio manager Mike Townshend and analyst Dhersan Chetty, several things help:
- Two decent harvests have rebuilt grain stocks.
- Soil moisture is relatively high.
- Dams are reasonably well supplied.
These reserves should soften the first blow if the rains disappoint. But they have limits. They cannot protect every farm, and they cannot carry crops through a long drought.
Neighbouring countries may be more exposed. Where there is less irrigation, a dry season hits harder.
How El Nino can reach your plate
Many people think a drought only affects farmers. In reality, it can touch almost every household.
Maize is a good example. It is a staple food, so a rise in the price of maize meal is felt quickly in many homes. But maize is also a key ingredient in animal feed. If feed costs rise, the cost of raising animals goes up too. That can show up in the price of chicken.
Dry weather also hurts livestock farmers. When pastures dry out, animals have less to graze on, and farmers come under more pressure.
Global events matter as well. If harvests are disrupted in other countries, imported foods can become more expensive, even when local supplies look healthy. So the price of food can be pushed up from several directions at once.
Less money for everything else
When food costs more, households have less left over. That does not only hurt the farming sector. Retailers that sell non essential goods can feel the pain too, even though they never buy a tonne of grain.
There is a wider economic angle. A lasting rise in food inflation could complicate the outlook for interest rates. Much would depend on whether higher food prices spread through the rest of the economy. You can track inflation figures on the Statistics South Africa website.
Not every food company will be hit equally
This is where the story gets more detailed. Food producers are not all in the same position. They buy different ingredients, hold different levels of stock, and have different abilities to pass higher costs on to shoppers through their prices.
Rising food inflation may squeeze one company’s profits while leaving another relatively safe. The commentary looks at three well known names to show the difference.
| Company | What it has done | What to keep in mind |
|---|---|---|
| Premier | Has built up stocks to help guard against rising input costs | Wheat supplies globally offer a better cushion than the local maize outlook |
| Tiger Brands | Has exited maize milling | Strong brands and cost savings could help improve margins |
| Astral Foods | Has hedged its maize feed costs through the coming summer | The protection ends, so later costs depend on future harvests and market prices |
Premier and Tiger Brands
Both companies have large exposure to wheat. Global wheat supplies look healthier than the local maize picture, which gives them a better buffer. Strong brands also support their businesses, and cost savings leave room to improve margins.
Tiger Brands has stepped out of maize milling altogether. Premier has taken a different route by holding more stock, which gives it some protection if input prices climb.
Astral Foods
The chicken producer chose a different shield. It has hedged its maize feed costs through the coming summer. In simple terms, it has locked in protection so that a further jump in maize prices will not hurt profits straight away.
That protection has an end date. Once the hedge runs out, costs will depend on later harvests and on what the market is charging for maize.
Why food retailers may cope better
Food retailers can usually pass higher purchase costs on to shoppers. If food inflation stays moderate, this can even support sales and profits, as long as the retailer’s own operating costs rise more slowly.
But there is a ceiling. Stretched households do not simply keep paying more. They may buy less, or switch to cheaper products. So higher prices on the shelf do not automatically mean better earnings for the store.
What to watch in the months ahead
The summer is only starting, and the picture will change as the season unfolds. Three things are worth watching:
- How much rain falls during the key growing months, and whether the heat becomes extreme.
- How long the protections last, including grain stocks and hedges.
- Whether higher costs weaken demand, as households cut back or switch to cheaper options.
Grain stocks and hedges can buy time, but they cannot do more than that. The final harvest will show how much time businesses and households really need.
The bottom line
A strong El Nino does not guarantee a disaster, but it is a real risk. South Africa goes into the season with fuller grain stores, good soil moisture and well supplied dams. That is a better starting point than many would expect.
Still, the price of food can rise quickly if the rains fail. Maize, chicken and imported goods could all become more expensive. The simple message is to stay informed, watch the forecasts, and keep an eye on your shopping budget. Keeping up with official weather updates and inflation data is an easy way to see what may be coming.
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