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| Worst may be over on food price front |
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| Mandakini Raina | |||
| Monday, 21 December 2009 08:51 | |||
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Economists, including the head of economics at the research firm, Indicus Analytics, Laveesh Bhandari, believe that food price dampening may begin in December with fresh stocks expected to enter the mandis
source: Mydigitallifefc Wholesale traders in one of Delhi’s oldest commodity markets, Khadi Baoli, have reason to believe that food prices have peaked and a downward movement is in order. Food inflation rose to 19.95 per cent in the week ended December 5, the highest in a decade. Finance minister Pranab Mukherjee is on record that expectations of lower food production have driven prices high in recent months. The expectations are, however, now turning positive. That should have a sobering effect on prices. Hopes of a good rabi crop run high also among agriculture and weather experts and economists. Food and farm minister Sharad Pawar expects a bumper rabi harvest. He told Parliament last week that wheat production was expected to surpass last year’s record of 80.58 million tonnes. With seasonal corrections expected this month in food prices, economists expect a cooling of food inflation. “We expect good winter rains. This will improve the situation considerably,” said wholesale trader Joginder Singh. Trader Vishal Gupta said he expected oilseed prices to moderate. “Harvesting for mustard oilseeds begins only in March. As of now the stock of mustard is good,” he said. The government’s chief statistician Pronab Sen said the prospect of a good rabi crop would bring down food inflation. “It cannot be said with any certainty that food inflation has peaked, but rabi prospects will be the key driver. It is in the sowing stage right now,” said Sen, who is also the secretary in the ministry of statistics & programme implementation. Economists, including the head of economics at the research firm, Indicus Analytics, Laveesh Bhandari, believe that food price dampening may begin in December with fresh stocks expected to enter the mandis. Seasonal corrections in prices, a trend that generally begins in November, may this time be seen this month due to the delayed monsoon, according to Sonal Varma, economist at Nomura. Winter rain will have some effect on the rabi crop. The Indian Meteorological Department is not sceptical. Although rain since October has been scanty in Punjab, Haryana, western Rajasthan, Saurashtra and Kutch, according to the department, there is still sufficient time left and forecasts indicate that the rabi belt that grows mustard and gram will see a recovery. The deputy director of the agricultural meteorology division, R P Samui, said there was not much aberration in the winter crop pattern this year. “As of today sowing is satisfactory and crops are expected to be normal.” However, Samui said mustard and gram crops in the north would be affected due to scanty rain. But there is still time and the crops may yet see a recovery. In any case, mustard oil prices have been rather stable, compared to other farm produce. Pulse and grain prices have risen by between 40 per cent and 50 per cent in the past year, but mustard oil has barely increased by 10 per cent. In December last year a litre of mustard oil was selling at Rs 62. A year down, it is around Rs 68. Crop scientists too believe that there is reason to be optimistic. “The situation is not that bad as the delayed monsoon rains provided enough moisture. In some cases, farmers ignored advise to grow late paddy,” said Swapan Kumar Datta, the deputy director general for crop science at the Indian Council of Agricultural Research. Food price inflation, however, is not a simplistic reflection of farm production, said Datta. “The government increased procurement prices, in fact, doubled them. That was bound to reflect in inflation data. The cumulative effect affects customers.” The widening gap between wholesale prices and retail prices needs to be bridged at the state-level, he said.
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