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Monsoon blues: Brace for price increases in food items

With rains playing hide and seek, economists expect kitchen budget to spiral

Sanjeeb Mukherjee  |  New Delhi 

As the spectre of drought looms over several states, retail prices of key commodities are set to rise at a faster pace. This could further increase the already high food price

According to economists, the retail (mainly tur), groundnut oil, mustard oil, (particularly jowar, bajra and maize), the entire lot of spices (including coriander, chili and pepper), cotton, sugar, poultry products and tea are expected to rise in the next few weeks because of low sowing on account of deficient rain.

In fact, price of pulses, and sugar have already started firming up, in anticipation of low supplies, as the window of is getting narrower with each passing day. The food ministry has already started taking a slew of measures to check increase in prices of these items.

Price of pulses, and sugar have already started firming up, in anticipation of low supplies
                     (In Rs per kg)
Commodity June 1, ‘12 July 23, ‘12 % Change
Turmeric 36 53 47.0
Potato 9.50 11.50 21.0
Sugar 28 34 21.0
Cotton* 32,500 38,000 17.0
Coriander 39 45 15.0
Groundnut oil 119 132 11.0
Mustard oil  95 100 5.2
*In rupees per candy. 1 candy equals to 356 kilograms
Source: Department of Consumer Affairs, NCDEX, and other agencies
Prices mentioned are average across the country, as these vary from city to city

Potato prices have doubled since January, while sugar prices have pushed up by Rs 3-4 a kg in retail markets in recent weeks. Tea has also moved up by 30 per cent in the open market.

“The big spike in prices, I feel, should come from coarse cereals, because of low acreage,” Ramesh Chand, director of the National Centre for Agricultural Economics and Policy Research, told Business Standard.

The sharp rise in the prices of coarse cereals, particularly maize, could push up prices of poultry products, as maize is also consumed in large quantities as a feed meal.

“The immediate fallout of low rains is rise in prices of pulses, vegetables, fodder, milk and increase in edible oil imports at higher rate,” said Ashok Gulati, chairman,

The southwest monsoon, the lifeline for Indian agriculture, has been 22 per cent deficient so far across the country. The big drop has been in Maharashtra, Karnataka, Gujarat, and Rajasthan, where there is all possibility of a drought if the rains do not improve significantly over the next week to 10 days.

“I feel prices will move up and along with mustard and soy oil in the coming weeks, as edible oils usually move in tandem because of their substitution value,” said Madan Sabnavis, chief economist at CARE Rating Agency.

He said along with cooking oils, the prices of onions and potatoes could also come under pressure. Yesterday, Prime Minister Manmohan Singh’s office said the this year was expected to be below normal, at around 92 per cent of the Long Period Average (LPA). This is almost four percentage points less than the last nationwide forecast made by the India Meteorological Department, which had pegged the rainfall at 96 per cent of the LPA. Any rainfall at 96-104 per cent of the LPA is considered normal and anything less than that is considered below normal.

The PMO also directed all states to embark on a massive contingency drive. Last week, Agriculture Secretary Ashish Bahuguna told reporters that the situation in was grim, though that of rice was comfortable.

Data from the agriculture ministry showed that till last week, the sowing of was 24.3 per cent less than normal, while pulses was around 22.3 per cent less than the normal area, which is an average of 10 years.

The acreage of groundnut was 41 per cent less than normal, while that of cotton is 7.52 per cent less than the normal area.

Among spices, the area under turmeric is around 30 per cent less this year, while that under coriander, chili and pepper is also down. These crops are mainly cultivated in low rainfall areas. The retail price of spices is already up by around 10 per cent in recent weeks.

“I feel both retail and wholesale prices of major farm commodities could see a strong rally in the next few weeks,” another leading economist said. Wholesale food price has been in double digits for four months in a row, standing at 10.81 per cent in June, while food price consumer was in double digits for a third straight month in June, at 10.71 per cent.

First Published: Wed, July 25 2012. 00:54 IST