More expensive food

Food will get more expensive in the coming weeks. One reason is the tense monsoon situation, which is making trade volatile because no one knows where things are going. Two, Raksha Bandhan, Janamashtami and Ganesh Chaturthi are in August itself, a month before schedule. Id and Navratri follow in September.

Festivals mean higher demand for cooking oil, rice, sugar, besan, maida, dry fruits, milk and spices. Can India cope? That is the question bulls are punting on. And what does it mean for your wallet? I did a bit of crystal ball gazing to help you get a fix.

Cooking oil: Prices will go up by at least Rs 2/kg in August to cope with festival demand. MRP, which is what you and I pay, will rise proportionately too. This figure is valid only if the monsoon eventually turns out to be okay; and the government does not impose customs duty on imported crude palm oil in a moment of madness.

If the monsoon fails, and the rain-fed soya and groundnut crops get decimated, India would become even more dependent on imports. The only limit would be the Indian consumer's ability to pay for it. Expect to pay at least Rs 55/kg.

Sugar: We are reeling under a short supply. Yet prices haven't risen as much as TV channels would have you believe when they discuss sugar equity stocks because of the government's decision to clear out local godowns before importing.

Now these godowns are virtually empty. As India's new crushing season starts only by October, imports will have to gain pace. But international prices are much higher than Indian prices. So Indian prices will have to rise too for importers to get into action.

The rule of thumb: you will pay the international price of raw sugar plus Rs 3/kg for processing and transportation. If you use Equal, this may not bother you now. But think of cola, chocolate, ice cream, biscuit and bread companies. They will make you pay. Eventually.

Maida: Maida will remain affordable, thanks to abundant wheat. Demand for maida rises in July when school tiffins again get stuffed with bread, noodles, and biscuits. But this year plenty of wheat and competition will keep things in check, festivals or not. Maida is selling now for around Rs 13/kg. Expect it to be at Rs 14.50/kg in August.

Chana and besan: They are affordable but won't stay that way. India needs to import chickpeas and the world market is rising. So, local prices would have to keep pace too. Expect besan to become more expensive between July-end and Diwali. That means higher cost for halwais and namkeen makers.

Rice: Like me, if you love the finer varieties–basmati, ponni, sona masuri, you must already be paying through your nose for them. Alas, things won’t get any better. This is not because of the rains, by the way. Instead blame it on the government's hugely successful procurement programme.

The MSP for basic varieties of rice is now so attractive that farmers prefer them over superior varieties bought exclusively by traders and rice mills. Lower production of the finer varieties means higher prices for you, me and NRIs who can't bear to eat any other kind.

Pulses: Pulses are hardy crops and can make do with very little water and inputs. So unless there is a drastic failure of rains across entire western and central India even after July 15 (highly unlikely), prices won’t be astronomical.

Even so, urad, moong and tur will become at least 10% more expensive in August to bring India at par with world prices and accelerate imports.
Expect to pay not less than Rs 50/kg for tur to your grocer, if he is an honest fellow.

Milk: This one is a no-brainer. Poor rains have left cows and buffaloes with little to eat. There is hardly any fresh green grass, so vital for optimum milk production. Fodder crops are also affected. In major milk producer Gujarat, fodder is 25% more expensive. That has forced dairies like Amul to pay farmers 20% more for milk. Ghee is already 40% more expensive than last June. But I can’t see a respite. Ditto for paneer and khoya.

Dry fruits and condiments: Cashews are expensive because the world has produced less this year and we import 6 lakh from Africa every year as desi cashew meets just half of total Indian demand. So, international prices play a hefty role.

Cardamoms are significantly more expensive because poor rains have hit local crop. Cloves could touch an amazing Rs 400/kg here because major exporter Brazil has a smaller crop. Thank god a little of all this stuff goes a long way.

Meat and eggs: An egg now costs Rs 3 because poultry farms are producing less. At the same time, Gulf countries such as Oman have lifted a ban on Indian egg and live chicken. This means a lot of eggs will get converted to powder for export. Chicken and buffalo meat are expensive because animal feed is soaring.

In short, carbs, proteins, fats and sugar are all set to become costlier. At a time when most of those deep discount grocery chains have shut shop and left your neighbourhood. Poor rains will be only part of the problem. A far bigger reason will be the rise in international prices to which we are now inextricably linked.

Rising incomes and population, coupled with stagnant farm yields, have left India increasingly dependent on foreign farmers to supply it with food. It is a reality from which there is no escape as the demand genie is unlikely to go back into the bottle. A good monsoon only affects the degree of our dependence. The bulls know this.

via Economic Times