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With prices on rise, agricultural commodities may push food inflation

In the benchmark Latur (Maharashtra) market, tur prices shot up by 32% in two months to Rs 48.5 a kg from Rs 37 per kg on October 31

Dilip Kumar Jha  |  Mumbai 

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In a major relief to farmers, prices of major agricultural commodities have started firming up due to lower acreage and production estimates for the ongoing rabi harvesting season. Price spurt in agricultural commodities, however, would push higher.

In the benchmark Latur (Maharashtra) market, tur prices shot up by 32 per cent in two months to Rs 48.5 a kg from Rs 37 per kg on October 31. Similarly, prices of all other varieties of pulses have risen during the period under consideration. Not only pulses, other agri commodities like ragi, bajra, jowar, but wheat and paddy have also seen a sharp increase in their prices between November and December.

The price increase in agricultural commodities would certainly push the wholesale price index (WPI) and consumer price index (CPI) up in coming months. But, given that the are due in near future, the government in all probability would not like to take any ran risk of an increase in the WPI and CPI and the hence, price of agri commodities could be monitored.

“Prices of agri commodities have started moving up due to estimates of lower acreage and output in rabi season. In certain cases, kharif output also remained lower this year following drought in and Tamil Nadu and also uneven distribution of rainfalls in Gujarat and some other major agri cultivating states. The price rise would have an upward pressure as of now. It is too early to say that prices of agri commodities would shot up. Given the fact that there is a lot of pressure on the government to ensure increase in farmers’ income, that will itself an upward pressure on prices. So, we can expect an increase in March onwards,” said Madan Sabnavis, Chief Economist, Care Ratings.

Data compiled by the showed total sowing area this rabi sowing season as of January 4 reported a decline of 3.41 per cent to 56.44 million ha for the current season versus 58.44 million ha by the same day last year. While rabi season rice which contributes nearly 15 per cent of its yearly production, posted 25 per cent decline in sowing area (to 1.4 million ha), the coverage under pulses reported a decline of 6.44 per cent to 14.36 million ha this year versus 15.34 million ha by the same time last year.

Coarse cereals sowing area also reported a fall of 17.3 per cent to 4.33 million ha this year versus 5.24 million ha last year. Acreage under oilseeds remained lower by 1.54 per cent to 7.52 million ha this year versus 7.63 million ha last year.

“Lower cash (lower realisations of crops) in the hands of farmers has also impacted rabi sowing this year. Even though mandi prices of major crops (11 out of 14 crops have increased, arrivals of these 14 crops have declined 17 per cent on-year despite around 1 per cent rise in kharif production this year (according to the first advanced estimates provided by Department of Agriculture), implying farmers or middlemen are holding on to stock,” said Hetal Gandhi, Director,

The southwest monsoon season ended with rainfall 9.4 per cent short of the long-period average (LPA). Though this is categorised as normal by the Indian Meteorological Department (IMD), rainfall distribution has been somewhat patchy – both across time and regions – and there are pockets of stress.

With the rabi season showing clear signs of weakness, rural India’s contribution to growth has come under a cloud. Unless the sowing situation improves in the next few weeks, there could be a trickle-down effect on the sectors being driven by rural India, Gandhi added.

Meanwhile, both WPI and CPI moved an a comfortable zone of between 2 and 6 per cent over the last four years due to subdued agri commodities prices.


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First Published: Tue, January 08 2019. 11:32 IST
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