PRETORIA, SOUTH AFRICA — Amid a coronavirus (COVID-19) lockdown, South Africa’s local wheat prices increased to record high prices of $300 per tonne in April, according to a report from the Foreign Agricultural Service of the US Department of Agriculture (USDA).

Wheat is the second most consumed grain in the country so any significant price increase has a detrimental impact on consumers’ food expenses.

South Africa is a net importer of wheat, therefore local wheat prices are impacted by movements in international wheat prices, the strength of the South African rand exchange rate and fluctuations in transport costs.

The rand has depreciated by 25% against the US dollar since January.

“Mainly two factors contributed to the depreciation of the South African exchange rate, namely the impact of COVID-19 and Moody’s downgrade of South Africa credit rating to junk status,” the USDA said.

Due to the uncertainty regarding the impact of COVID-19 on the global economy, emerging market currencies’ values have been weakening, as stable and less risky currencies have been favored.

As a result of a declining planted area, South Africa’s wheat production dropped by almost 50% to less than 2 million tonnes per year. The 2019-20 wheat crop, at 1.5 million tonnes, is the third lowest since deregulation in 1997. Meanwhile, the local demand for wheat increased by 50% the past 25 years to more than 3 million tonnes.

South Africa will have to import about 2 million tonnes of wheat in the 2019-20, the USDA said, which is more than half of local demand. For the first seven months of the year, South Africa already imported 1.1 million tonnes of wheat, 80% more than the same period a year earlier.

Looking ahead, producers will plant 495,000 hectares of wheat for 2020-21, a decrease of 8%. With average yields, production will reach about 1.6 million tonnes.

Consumption is expected to reach 3.4 million tonnes.

“It is still too early to predict the precise impact of COVID-19 on the South African economy, but economists estimate that the economy could shrink as much as 10%,” the USDA said.

The USDA estimates South Africa will again have to import about 2 million tonnes of wheat in 2020-21. The rand exchange rate will stay under pressure due to the uncertainty regarding the global recession and the Moody’s downgrade.

“This means that for the next year local wheat prices will remain relatively high, which will have a negative inflationary impact on bread and wheat flour prices and increase the South African consumers’ expenditure on basic food products,” the USDA said.