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3/2/2016, 2:52 PM (Source: TeleTrader)
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El Niño brings higher food prices to Africa

Drought is about to bring serious problems for the economies in several African countries, as harvesting season is ending with higher prices of food.

There was a hot and dry summer in South Africa, and electricity (13.2%) and water bills (11.4%) are expectedly higher, but now the nation of 55 million people faces higher food prices.

Crops received two thirds of annual rains average in 2015, at the best: it was the driest year since meteorologists keep track of precipitation, mostly due to El Niño weather phenomenon, which essentially causes switch in rainfall patterns. Crops Estimate Committee of the South African government now projects a near 25% decline in the country’s grain harvest in 2015/2016 agricultural season.

"In the third quarter of 2015, the sharp decrease was mainly a result of falling production in field crops, such as maize, sunflowers and sugar cane," said the Statistics South Africa (StatsSA) in its report on food.

The country is now forced to import up to half of its annual needs in grains, such as maize, wheat and rice. Imports are more expensive with the weaker national currency rand, which lost almost 35% of the value compared to the U.S. dollar. The South African rand was weaker by 0.87% to the U.S. dollar, and traded 1.22% lower compared to the U.K. pound, and 0.58% lower versus the euro at 2:50 p.m. CET. The Dow Jones South Africa Stock index was in positive territory: up 1.55% to 1,635 pooints at 2:49 p.m. CET.

South Africa Reserve Bank (SARB) recently estimated that prices of food could be expected to rise by 11% year-on-year by the end of the fourth quarter of 2016, almost double the number of 5.6% recorded in December 2015. Fertiliser prices also started to rally, and farmers face higher cost on top of the lower crop yields.

While situation in South Africa is difficult enough, with unemployment rate of 24.5%, there are troubles further north.

The Central African Republic (CAR) has been suffering due to three-year long internal conflict and people displacement. Adding to the misery are a string of poor harvests, disrupted markets and soaring prices of food, according to the report from the United Nations' Food and Agriculture Organization (FAO) and the World Food Programme (WFP).

The agencies warn of fall in cereal production of 70% in the last three years. Livestock disappears, too. Killings and looting reduced the number of cattle to almost half compared to pre-crisis levels, and the number of goats and sheep shrank by as much as 57%, said joint WFP/FAO report.

"The situation is dire. Half of the population faces hunger," said Bienvenu Djossa, WFP Country Director in CAR. That spells disaster, if the planting season starting in April turns out poor.

"The latest numbers are cause for concern not only because people skip meals and cut portions, but also because they opt for less nutritious foods that provide far less of the proteins and vitamins they need," said FAO Country Representative Jean-Alexandre Scaglia.

Breaking the News / ZR