When it rains, it soars! Kitchen budgets on fire

Economic Times

a day ago

Kolkata | Pune: Indian households are feeling the heat from a surge in food prices, driven by heavier-than-expected monsoon rain, lower crop production, and a weakening rupee. In the past one month, prices of key staples — including edible oils, rice, various flours and vegetables — have risen sharply on a sequential basis, according to retail and agribusiness executives, putting pressure on kitchen budgets across the country. Prices of mustard and sunflower oil, rice, and tomatoes have jumped as much as 50% sequentially in the last two-four weeks. Wheat flour (atta), refined flour (maida), semolina (suji), and sugar have also seen price increases of up to 6% over the past month and are 8-12% higher year-on-year. A sharp depreciation in the rupee — from 85.90 per US dollar on July 15 to 87.82 on August 5 — has lifted the price of imported edible oils.
'A two-rupee difference in exchange rate makes imported oil costly,' said Angshu Mallick, managing director of AWL Agri Business, the country's largest packaged edible oil company. Mallick also estimates mustard seed production at 10- 10.5 million tonnes this year, well below the government's forecast of 11.5-12 million tonnes. Economists have forecast the rupee to remain weak due to uncertainty around US tariffs. Mustard oil price has risen nearly 30%, or Rs 40 per litre, over the past three months.For soybean, sunflower and palm oils, the rise has been 10-15% in the last one month. 'Prices of palm, sunflower, and soybean oil—that make up over 85% of India's edible oil consumption—have surged since the past two months due to limited supply and low inventories,' said Rahul Guha, senior director at Crisil Ratings. Guha, however, said the domestic weighted average prices are expected to witness a marginal decline year-on-year in the current fiscal given the impact of recent duty cuts. The customs duty on crude edible oils such as sunflower, soybean, and palm oils was halved in June to 10% to control prices. The jump in the price of coconut oil has been much steeper than others: from Rs 160-170 per litre a year ago to Rs 480-490 in the coastal areas of Konkan and Rs 520-530 in Bengaluru.
The 'unprecedented levels of inflation' in copra has been driven by a supply-demand gap created by a 9% drop in productivity of coconut due to uneven weather patterns and unseasonal rains in April and May, said Saugata Gupta, chief executive of Marico, one of the largest players in branded coconut oil. 'Principally, it is the inelasticity of certain sources of demand that accentuates the demand supply gap during such times as copra can't be imported,' the CEO told analysts on Monday. Gupta, however, said prices have started to soften a bit. To be sure, overall food inflation remains contained currently, having peaked in 2022 and staying high till 2024. India's food prices were in deflation zone in June at -1.06% YoY due to lower prices of vegetables, pulses, meat and fish, cereals, sugar, confectionery, milk and dairy products, and spices, as per the latest government data. Industry executives said the current spike in inflation in some commodities is temporary and should ease in two-three months when the new crop comes in. Crisil's Guha said the price increase of edible oil should ease after October-November harvest with better yields anticipated for palm and sunflower.
BROAD-BASED RISE
In the past one month, prices of atta, maida, and suji have increased 5-5.5%, while wheat is up 3%, shows industry data. Executives attribute the rise in wheat price to stock limits imposed on traders, millers, wholesalers and retailers, pushing open market prices above the government's minimum support price. Sugar prices at factory gates are up 7-8% over last year due to lower crop yield, and have risen 4% in the last month, fueled by a lower sales quota and festival demand. Rice prices too have surged 10-15% in the last two weeks after Bangladesh and Kenyan governments announced plans to import rice. Bangladesh will buy 900,000 tonnes of rice, while Kenya will import 500,000. Prices of the Swarna variety have increased from Rs 29/kg to Rs 32.50.
'The current price movement is directly linked to the export demand,' said Keshab Kumar Halder, managing director of Halder Venture Ltd, an exporter of rice.