Additives score over principal agri commodities in 2013

Tomato, potato and onion as the highest gainers, pulses the highest loser

Tomato, potato and onion were the three perishable commodities known largely as additives that disturbed kitchen budget with highest inflation in both wholesale and retail markets in 2013. Pulses, edible oils and sugar proved as saviors for consumers with a steep fall in their prices despite an upsurge in the Wholesale Price Index (WPI) and Consumers Price Index (CPI).

Data compiled by the Ministry of Food showed that the retail prices of tomato and onion jumped through the roofs in the third quarter of the calendar year hitting almost Rs 90 and Rs 100 a kg respectively in the national capital. Hoarding of the middlemen coupled of spoilage in the godowns created an artificial shortage of these vegetable additives. Also, added by the delay in showing and harvesting of these new season crops due to extended season monsoon rainfalls.

While the government made huge attempt to bridge the shortage of onion through imports from major producing countries, yet it was insufficient to control the price rise. These perishable commodities, however, softened with improvement in arrivals of the new season crops.

Today, tomato, potato and onion are quoted in Delhi retail market at Rs 30 a kg, Rs 20 a kg and Rs 28 a kg, a rise of a staggering 114.29%, 54% and 27% respectively in the last one year. In wholesale markets, however, the price inflation in these commodities was even sharper.

For the year 2014, however, the movement in the prices of agricultural commodities would depend on the actual turnout of the monsoon rainfalls.

“At the beginning of the year, one normally assumes that the monsoon will be normal and that kitchen commodity prices would remain largely stable. Given that the oilseeds and pulses output have been stable, and could be marginally higher for FY14, one can assume that the stocks will see us through till the end of the season i.e. October of so and should keep prices range-bound,” said Madan Sabnavis, Chief Economist, Care Ratings.

Pulses remained under severe pressure this year with a drastic decline in their prices due to the government’s decision to allow import without balancing the trade through exports. This means, the government of India continued suspension on exports of pulses this year amid fears of increasing inflation.

Consequently, the CPI stayed in double digit throughout the year in 2013, hitting the level of 11.24% in November, because of costlier vegetables. WPI based inflation also rose to 7.52% in November, the highest level seen in 14 months. In fact, the Reserve Bank of India raised concerns on food inflation which stood above its comfort level of 4-5%.

“In case of perishables, given that there are 3-4 seasons when the crop comes in, the normal monsoon forecast and kharif/rabi crop no longer holds and it is literally moving from one season to another – just a company’s quarterly results, except that they do not follow the calendar months,” said chief economist of a large business house.

Sabnavis hoped that given the exceptionally high prices this year for almost three months, it would be reasonable to assume that the kitchen commodity price increases will be under control in 2014.