Record global food prices benefit Indian farmers, but stoke inflation fears
Global food prices rose for an eighth consecutive month in January to their highest level since July 2014, latest data from the Food and Agriculture Organisation (FAO)’s food price index showed, which is proving to be a boon for farmers but could also stoke domestic inflation. Higher food prices could complicate the country’s nascent economic recovery, analysts said.
Higher international prices of food commodities are spurring India’s food exports, but they will make India’s food imports costlier. The country, for instance, relies on imports to meet 70-74% of its vegetable or edible oils requirement.
The FAO’s food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 113.3 points in January 2021, 4.7 points ( or 4.3%) higher than in December 2020, according to the UN agency.
This marks the eighth month of consecutive rise but also the highest monthly average since July 2014. The surge was led by higher prices of sugar, cereals and vegetable oils, while meat and dairy products also rose.
China is stockpiling cereals. Argentina has suspended sales of maize for export. Russia has imposed taxes on exports of wheat, barley and maize, putting prices under pressure.
“India will be most affected by a rise in edible oil prices. India imports 70% of its requirement. International shortages are running high,” said Abhishek Agrawal of Comtrade, a commodities trading firm.
The FAO’s vegetable oil price index averaged 138.8 points in January, up 7.7 points or 5.8% from December, marking the highest level since May 2012. Lower palm oil production in Indonesia and Malaysia are to blame, Agrawal said.
Sugar prices jumped 8.1%, with lower output across the European Union, Russia and Thailand and South America.
The strong gains in commodity prices have, however, quickened India’s commodity exports. Cotton has become a quarter per cent costlier in international markets, prompting the Cotton Corporation of India to forecast brisk exports of cheaper fibre from India.
India’s cotton shipments are expected to rise to 7.5 million bales (of 170kg each) compared to 5 million bales exported last year, according to a forecast by the Cotton Corporation of India.
Domestic soyabean prices are currently selling 10% above minimum support prices, Agrawal said, aided by brisk exports. Firmer international demand and price rises for maize, wheat and soybeans could prove to be a boon for Indian growers.
India’s basmati and non-basmati rice exports are expected to be around 17 million tonne against 9.5 million tonnes in the previous financial year, with an 80% increase in exports between April and December 2020, official data showed.