Food prices spike as monsoon rain gets scarce

The food prices in the country are showing an upward trend as a deficiency in the rainfall during the current monsoon season is nearing 20%.

According to the data provided by the Kotak Securities, the actual cumulative rainfall in the country, during the current monsoon stands at 315.5 millimetres (mm), 19% lower than normal rainfall of 389.4 mm.

The rainfall deficiency in the country stood in excess of 40% in the first three weeks of monsoon, before the situation started to improve. However, during the current week, the situation has deteriorated again, with rainfall deficiency going up to 35.7%, a whopping increase from 19.8% in the previous week.

On a regional cumulative basis, spatial distribution has been deficient across India, according to the report by Kotak. Out of the 36 sub-divisions across India, till date, 21 have received deficient rainfall and 15 have received normal rainfall.

The shortfall in the rains has impacted the food prices in the markets as well. Average weekly price levels indicate that food prices have been mostly on the upside over last week, according to the provisional data available with the Department of Consumer Affairs. Vegetable prices increased 16.5% over last week while the prices of pulses increased 1.8%. Cereal prices fell 0.9% while the price of oils and fats increased 0.3% over last week in the week ending July 21.

The major concern in the rain shortfall is the effect on the Kharif crop that has recently been sowed across the country. The northern state of Uttar Pradesh is a major producer of rice, maize, pigeon pea, and moong bean while Himachal Pradesh generates large volumes of fruits like apples, as well as maize, barley, and pulses. Farmers in the central Indian state of Madhya Pradesh cultivate large quantities of soya and other oilseeds, as well as gram, paddy, and cotton. All these states have been worst hit by the monsoon deficiency.

According to data provided by Kotak, as of July 19, the total Kharif acreage was 6.8% lower than the same period last year. Rice sowing was 9.4% lower at 14 million hectares. Oilseed acreage was 7.1% lower at 11.1 million hectares and pulses acreage at 6.2 million hectares was 15.9% lower than last year. Coarse cereal acreage was 7.4% lower at 10.2 million hectares. Sugarcane and cotton acreages were at 5.0 million hectares (5.2 million hectares last year) and 9.6 million hectares (9.3 million hectares last year) respectively.