Retail food prices in India rose
sharply by 32% in the last two
months to July. According to the latest government data, prices of
essential commodities, including lentils, sugar, groundnut oil, tea and
potato, had jumped substantially during the period. Internationally too food
prices have escalated sharply in recent times, as major food producing regions like
India, China, Brazil, etc. are facing erratic rains that led to flood in
some parts while drought in several others. In India, for instance, already 161
districts out of 600-plus have been declared as drought-hit owing to
erratic monsoon so far this year. The impact of this is now reverberating in
international markets which depend on imports of such commodities as sugar,
rice and pulses among others from India. Sugar futures, for instance, in New
York rose to their record highs at 20.7 cents on August this year, their highest in
the last 28 years since April 2, 1981, amidst concerns of a worldwide
production deficit, as leading producers like
India, China and Mexico face supply constraints. India, the second
largest producer after Brazil, is now depending on imports to meet the sudden surge
in demand during the approaching festive seasons in September-October.
Sugar production in India has been affected badly due to a number of factors such
as lower crop because of scanty rains, and also, farmers shifting to other crops
due to the usual delayed payments from sugar mills. The situation has also
been aggravated by the closure of several sugar mills in the country. According
to the India Meteorological Department (IMD), the average monsoon
rainfall was deficient by 25% in the country for the monsoon period June 1-August
5, while sowing of crops was down by a fifth. In China, the third largest
producer, globally, output may trail demand by as much as 1.5 million
metric tons next year, as the acreage used to grow cane decreases, said a report
in IST, a news agency. Mexico, another leading producer, has set an
import quota of 393,000 tons until December to cover a drop in output. A smaller
Mexican crop will tighten supplies to the US and boost prices, the report quoted
John Sheptor, Imperial Sugar Co's Chief Executive Officer, as saying. Among
other notable commodities to register a sharp spike in their prices is tea. Tea
prices have been hitting new highs in recent times, rising almost a third in the
last one year on similar concerns of droughts and lower output in leading
exporting nations like India, Kenya, and Sri Lanka. The wholesale price of the
best black tea, or BP1, touched $3.69 a kilogram at the weekly auctions
in Mombasa, Kenya in early June, while the wholesale prices of the highest
quality black tea have more than doubled from a decade low of $1.75/kg in
December 2001, reported Financial Times. In case of India, the prices have risen
two-thirds, which is the highest in the last 10 years. The spike in prices has
been due to poor harvest in these nations. According to the United Nations
Food and Agriculture Organization (FAO), tea production in India fell 15%
between January and April, whereas in Sri Lanka too production was lower
by 41% during that period, while in Kenya, the output fell 7% during
January-March period.
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