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Tag: Food Price Index

  • Easing international meals costs and promise of fine monsoon give RBI elbow room forward of MPC assembly

    Global meals costs are seemingly easing. That, and the India Meteorological Department’s (IMD’s) up to date forecast of a better-than-normal monsoon, must be excellent news because the Reserve Bank of India’s financial coverage committee (MPC) meets on June 6-8 amid considerations over inflation.

    The UN Food and Agriculture Organisation’s (FAO) meals value index has fallen for a second consecutive month to 157.4 factors in May. The index, which is a weighted common of world costs of a basket of meals commodities over a base interval worth (taken at 100 for 2014-16), had hit a report of 159.7 factors in March and 158.3 factors in April.

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    The decline within the benchmark gauge for worldwide meals costs comes regardless of the ‘cereal’ and ‘meat’ sub-indices throughout the general FAO index scaling new highs of 173.4 factors and 122 factors respectively in May. But this has been offset by a major dip within the ‘vegetable oils’ sub-index (from a peak of 251.8 factors in March to 237.5 in April and 229.3 in May) and in addition these of ‘dairy’ (from 146.7 factors in April to 141.6 in May) and ‘sugar’ (121.5 in April to 120.3 factors in May).

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    The FAO knowledge clearly counsel that international costs have fallen off their March/early-April peaks within the case of vegetable oils and dairy merchandise. The most-active crude palm oil futures contract closed at 6,468 ringgit per tonne within the Bursa Malaysia derivatives change on Thursday, after buying and selling at a lifetime excessive of seven,268 on March 9.

    Prices of skim milk powder have likewise come down from $4,599 to $4,116 per tonne on the Global Dairy Trade fortnightly auctions between April 5 and May 17, whereas dipping much more, from $7,111 per tonne on March 15 to $6,043 on May 17, for anhydrous milk fats (ghee).

    Falling international costs translate into decrease home inflation, particularly for commodities which can be considerably imported (vegetable oils).

    They have an analogous influence on commodities whose home costs are linked to export parity ranges.

    The collapse of powder and fats costs, first within the worldwide after which home market, have already led Maharashtra dairies to slash procurement charges of cow milk from Rs 35-36 to Rs 32-33 per litre because the first week of May. Prices might cut back additional as soon as fodder availability goes up with the arrival of the monsoon.

    The meals inflation state of affairs in India has additionally improved because of supply-side administration measures by the Centre. That contains banning exports of wheat (thereby de-linking home realisations from hovering worldwide costs) and permitting import of as much as 2 million tonnes every of crude soyabean and sunflower at nil responsibility (to partially counter the impact of Indonesia’s restrictions on palm oil shipments).

    Even in cereals, the place the FAO attributed the all-time-high value index in May to India’s wheat export ban resolution, worldwide costs are prone to ease with the harvesting of the Russian crop. Russia is anticipated to export 39 million tonnes (mt) out of a complete manufacturing of 85 mt within the new 2022-23 season (July-June), as in opposition to corresponding figures of 32-32.5 mt and 76 mt in 2021-22.

    One indicator of improved provides within the days forward is wheat costs on the Chicago Board of Trade: These are actually at $10.5-10.6 per bushel, after crossing $12.8 ranges on May 17 following the Indian export ban.

    But it’s not solely world costs, the place the FAO index soared from a low of 91.1 factors in May 2020 (on the peak of the Covid-19 lockdowns world wide) to the report 159.7 factors in March 2022 (after the Russian invasion of Ukraine) — there may be additionally hope from the prediction of a ‘normal’ monsoon. On May 31, the IMD predicted combination rainfall for the nation in the course of the four-month southwest monsoon season (June-September) at 103 per cent of the historic lengthy interval common (LPA). The IMD had predicted rainfall at 99 per cent of the LPA in its first forecast on April 14.

    On each counts – easing international meals costs and the prospect of an excellent monsoon – the MPC members can maybe afford to breathe considerably simpler than within the May 2-4 “off-cycle” assembly that resulted in drastic rate of interest hikes and financial tightening actions.

  • Across farm commodities: Growth silver lining however meals inflation could also be darkish cloud

    First, it was the Reserve Bank of India (RBI) that, on December 4, revised downwards its GDP de-growth projection for 2020-21 from 9.5% to 7.5%. On Thursday, the National Statistical Office (NSO) pegged the present fiscal’s GDP development at minus 7.7%. The determine was even higher, at minus 7.2%, after netting out taxes and subsidies on merchandise.
    These official estimates — together with knowledge pertaining to the buying managers’ index, electrical energy and gasoline consumption, items and providers tax assortment, Google mobility index and different high-frequency indicators — verify one factor: The extent of unfavourable development induced by Covid-19 and the lockdown hasn’t been as a lot as was initially feared.
    The NSO’s first advance estimates counsel that the Indian economic system might even register a small 0.3% year-on-year development within the second half (October-March), after contracting minus 14.9% within the first half (April-September) of 2020-21.
    But this relative optimism on development — financial exercise appears inching in direction of its pre-pandemic ranges — is tempered by an rising problem: meals inflation.
    This additionally makes it troublesome for the RBI to additional minimize rates of interest and even proceed with its accommodative financial coverage stance.
    The NSO’s GDP knowledge got here the identical day the UN Food and Agriculture Organization launched its newest Food Price Index (FPI) quantity for December. This index – reflecting worldwide costs of a basket of meals commodities towards a base 12 months (2014-16) worth of 100 – averaged 107.5 factors for the month. It was the very best since November 2014.
    What is critical is how the FPI has soared since May 2020 (see chart). From falling to a four-year low of 91 factors then, it has hit a greater than six-year excessive in December.
    This excessive world value volatility may be seen throughout farm commodities.
    Wheat, corn and soyabean costs on the Chicago Board of Trade change (for essentially the most actively-traded futures contracts there) are ruling at $6.42, $4.94 and $13.55 per bushel, respectively, as towards their corresponding year-ago ranges of $5.50, $3.84 and $9.44. The value of uncooked sugar futures traded on the Intercontinental Exchange has equally gone up from 13.59 cents to fifteen.60 cents a pound within the final one 12 months. So has crude palm oil from 3,042 to three,817 ringgit per tonne at Kuala Lumpur’s Bursa Malaysia Derivatives change.
    Export costs of rice (Thai white grain with 5% damaged content material) and cotton (the benchmark Cotlook A index of Far East landed charges) are additionally greater in comparison with a 12 months again: $512 versus $418 per tonne and 86.55 cents versus 78.75 cents per pound, respectively.
    Skim milk powder costs at Global Dairy Trade, the fortnightly public sale platform of New Zealand’s Fonterra Cooperative, averaged $3,044 per tonne on January 5. That is a steep leap from $2,373 eight months in the past.
    There are three essential causes for worldwide agri-commodity costs firming up up to now few months.

    The first is a gentle normalisation of demand as most international locations, together with India, have unlocked their economies after May. Even as demand has step by step recovered, restoration of provide chains post-Covid is taking time. Dry climate in main producing international locations equivalent to Thailand, Brazil, Argentina and Ukraine, plus a scarcity of transport containers, has solely aggravated the supply-demand imbalances.
    The second motive is stockpiling by China, which has stepped up imports of every thing – from corn, wheat, soyabean and barley to sugar and milk powder – to construct strategic meals reserves amid rising geopolitical tensions and pandemic uncertainties. Last month, the nation revealed a brand new draft legislation considering “new situations and questions” posing extreme challenges to its “grains stockpile security”.

    The third motive might should do the ultra-low world rates of interest and floodgates of liquidity opened by main central banks. This cash, which has already flowed into fairness markets, might effectively discover a residence subsequent in agri-commodities – extra so, in a situation of tightening world provides.
    Household inflation expectations in India have historically been formed by meals and gasoline costs. Retail costs of petrol and diesel in Delhi have, since final 12 months, moved from Rs 75.74 and Rs 68.79 to Rs 84.20 and Rs 74.38 per litre, respectively. Annual shopper meals value inflation stood at 9.43% in November. That quantity, greater than GDP development, is the one price monitoring within the months forward.