Is food inflation set to rise again? Two factors that could reverse low farm prices

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Updated: October 25, 2018 1:47:47 PM

During the current financial year, the year-on-year inflation rate of food articles was down 0.21%, while non-food agricultural articles saw an increase of 4.17%, which has been lower than the 5.13% for “all commodities”.

onion wholesale market, India's largest onion wholesale market, online wholesale market, APMC, National Agriculture Market, eNAMThe more important reason could be the higher prices of diesel, fertilisers and crop protection chemicals, which were not a major concern till a year ago.

Will the story of depressed farm prices, which India has witnessed for over four-and-half years now, will soon reverse? Indian farmers have been distressed for quite some time now due to poor crop realisations, partly on account of weak agri-commodity prices globally after April 2014 and because of demonetisation and GST (goods and services tax) during the current government’s tenure. Also, the prices of food items such as onions and tomatoes have not increased that much in the recent past or increased too slowly, denting sentiment in predominantly cash-based produce markets.

According to a report in Indian Express, the trend of stagnant food prices can reverse. There has been draught north Karnataka, large parts of Maharashtra and Gujarat, which could have an impact on just-started rabi seasons. However, the lower production due to deficient rains could not be the only reason that can affect food items prices. The more important reason could be the higher prices of diesel, fertilisers and crop protection chemicals, which were not a major concern till a year ago, and now might affect farmers’ pockets and discourage them to produce more as they are already facing margin squeeze from lower produce realisations. Notably, the rise in diesel prices leads to increasing the input cost of cultivation.

So far, Gujarat has identified 51 out of its 251 to be drought affected; while Karnataka has the done the same for 100 out of 227 talukas, and Maharashtra 172 out of 358 talukas. The number is expected to rise further in the coming weeks. In the rabi season, the crops that will be impacted include onion, chana, jowar, wheat, among others. Even yields of Kharif maize, cotton, groundnut and soybean, which are being harvested at present, could also see the impact.

Sunil Katkade, a farmer from Naigaon village in Sinnar taluka of Maharashtra’s Nashik district, told the paper that the total cost of cultivation of onions has increased to Rs 39,500 per acre from Rs 34,500 in the last one year. Prices of diesel have also spiked as the fuel now costs at about Rs 79 per litre, whereas it was under Rs 60 a year ago.

The cost increase is expected to reflect in the farmers cutting back on plantings. And this might happen in this rabi season, effects of which will be felt in the period of April-May, the paper said.

Apart from this, there are also reports of disease attacks, particularly on sugarcane. Sugar production in Maharashtra is expected to go down to 92-95 lakh tonnes (lt), from the earlier projected 115 lt and the record 107.10 lakh tonnes of 2017-18, due to the combination of drought and white grub, according to B.B. Thombare, chairman of the Latur-based Natural Sugar & Allied Industries. India’s top sugar producer state, Uttar Pradesh, is expected to see lower production due to an airborne fungal disease ‘Pokkah Boeng’ that leads to shortening of the cane top and leaves, and thereby retarding plant growth and yields.

During the current financial year, the year-on-year inflation rate of food articles was down 0.21%, while non-food agricultural articles saw an increase of 4.17%, which has been lower than the 5.13% for “all commodities”.

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