Food inflation expected to soften in coming months

Food inflation, which was on continuous uptrend before Diwali, is expected to soften in the coming months supported by a high base effect of last year, healthy crop production buoyed by normal rains, and ample ground water that supports the rabi crop. However, despite a marginal reduction, some pressures on cooking oil inflation will continue to remain given elevated global prices and a weaker rupee that could impact imports, industry leaders and analysts said.

Retail inflation had accelerated to 4.48% in October from 4.35% in September, while wholesale inflation had increased to a five-month high of 12.54% from 10.66% in September.

Before Diwali, prices of almost all food commodities were moving upwards. Dipti Deshpande, principal economist CRISIL said, “As in October, the cereal prices were slightly up by ~1% on year while prices for other food groups like pulses and oilseeds were heading north significantly by 17% and 30% respectively.”


However, post-Diwali, consumers are likely to get some relief from high food inflation.
“We expect food inflation to remain soft in the coming months supported by a high base effect of last year, healthy crop production buoyed by normal rains, and ample ground water that supports the rabi crop,” said Deshpande.

Angshu Mallick, CEO, Adani Wilmar said, “Edible oil prices were at their peak during the first week of October. Thereafter, markets have seen gradual reduction following the import duty cut. Prices have corrected by almost 10% from their top levels during last one month, which the consumer will start feeling at the retail level during next 10 to 15 days.”

“Post Diwali demand for cooking oils has slowed down. A rally in global edible oil prices looks doubtful as there is lot of resistance. Overall condition of the domestic crops is good, which should keep prices stable to downwards,” said Sudhakar Desai, president, Indian Vegetable Oils Producers Association.

He added, “During last fortnight, the ex-factory loose prices of palmolein has declined from Rs 121/kg to Rs 117/kg, price of soyabean oil has declined from Rs 139/kg to Rs 122/kg, while mustard price is down from Rs 180/kg to about Rs 170/kg.”

“Prices of staples like wheat, sugar and rice are stable, with exception of Basmati rice, whose prices have increased by 10% and may stay firm or increase slightly as exports are good, while domestic demand during the upcoming wedding season is expected to be higher,” said Mallick.

A series of policy decisions about imports, stock limits and futures trade taken by the central government before Diwali have kept prices of most pulses except urad suppressed.

"Tur prices have declined by about Rs 4-5/kg from their peak of Rs 94/kg after stock limit was imposed on the commodity by the government. As arrival of new crop of tur gathers pace by mid-December, can increase pressure on tur prices. A marginal decline is expected in the sowing of chana. But comfortable stocks of chana and moong with the government will take care of the supply side. Government policies coupled with the subdued consumer demand may keep prices table to downwards," said Nitin Kalantry, a dal miller from Maharashtra.