Prices of tomato linked food items may spike 5-10% following crop loss

Tomato prices in some mandis are still high

Tomato prices in the domestic market have started to cool from the highs it reached after massive crop loss due to floods and heavy rainfall in major producing states. However, the impact of squeezed supply is likely to impact the prices of food items in its value chain.

Apart from being used in raw form for cooking vegetables, tomato is processed to make ketchup, sauce, puree etc. Market players expect their prices to increase 5-10 per cent owing to short supply and higher procurement costs. However, the quantum of the possible upward revision in prices would be known in the coming weeks or months, since most producers keep a backup inventory apart from tomato paste for production.

Both the wholesale and retail prices had shot up over the past few weeks, especially after above normal rainfall was witnessed in September across India, destroying several agricultural and horticultural crops, including tomato, sugarcane, paddy etc.

For example, the wholesale tomato prices in Nashik-Pimpalgaon trebled from Rs 1,200 per quintal (100 kg) on August 31 to Rs 3,555 per quintal on October 5, before cooling to Rs 1,905 per quintal on October 16. Similarly, tomato prices in Delhi’s Azadnagar increased 180 per cent from Rs 1,387 per quintal on August 31 to Rs 3,770 per quintal on October 12, before cooling off to Rs 3,121 per quintal on October 16.

In turn, the retail tomato prices touched almost Rs 80 per kg in major cities owing to short supply and transportation issues over the past few weeks following heavy downpour.

Prices in some mandis are still high. In Ahmedabad, prices have stayed firm at Rs 3,550 per quintal since October 14 compared to Rs 1,500 per quintal on August 31, 2019.

Nitin Seth, the vice chairman of G D Foods, which manufactures and markets 'Tops' brand of processed food, said the company had procured tomato at higher price of nearly Rs 3,000 per quintal this season.

“Fortunately, we keep adequate stock of tomato paste for manufacturing ketchup etc. However, those companies who do not have a robust backend supply would be hardest hit,” he told Business Standard and forecast there could be minor hike of 5-8 per cent in the prices of tomato processed food items.

A senior official with a Pune-based food processing unit said, on condition of anonymity, that it was normal for the downstream product chain of a commodity to take the burden of higher cost of raw material. “I expect the prices of tomato based products to appreciate by 5-10 per cent in the coming months, since there was massive crop loss to the commodity owing to incessant and unseasonal rainfall during the monsoon season,” the official said

Meanwhile, Mumbai-based agro trader and former director of Agriculture Produce Market Committee (APMC) Shankar Pingle claimed the scarcity of tomato in the market would persist for the next 4-6 weeks and thereafter the situation would gradually improve.

“Although, heavy rainfall and floods destroyed crops, yet it has also increased the chances of better crops in the coming cycle due to greater availability of water for irrigation and soil moisture,” he said.

Pingle noted there would be little impact on tomato based processed foods, since the manufacturers normally kept inventory to suffice for 5-6 months.