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Vegetable prices ease across the board

    Vishwanath Kulkarni
    Harish Damodaran
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Will help rein in inflationary expectations among consumers

Policymakers, economists and India Inc heaved a sigh of relief when the consumer price index (CPI) data for December showed annual inflation in vegetables fall to 38.76 per cent from a record 61.6 per cent the previous month.

Well, they’ll be thrilled when the data for January is out in less than a month’s time.

Most vegetables – onion, cauliflower, cabbage, carrot, bottle gourd, brinjal, peas, radish and beans – are currently retailing not just below their November peaks, but even their January 2013 levels.

Prices are ruling higher than a year ago only in a few vegetables, according to information accessed from a leading modern-format retailer for the National Capital Region. Even in their case – potato, tomato and capsicum, for instance – prices have dropped considerably since November (see table).

These could translate into low single-digit, if not negative, inflation in vegetables for January. Given the already low/negative CPI inflation rates for pulses (2.15 per cent in December), edible oils (0.7 per cent) and sugar (minus 5.61 per cent), it may further reinforce an easing of price pressures in food items.

“Vegetables prices matter for inflationary expectations among consumers since these, unlike say white goods, are bought on a daily basis,” said Devendra Kumar Pant, Chief Economist at India Ratings & Research.

Normalcy restored

Pradipta Sahoo, Business Head (Horticulture) of Mother Dairy Fruit & Vegetable Pvt Ltd, attributed the decline in vegetable prices to the end of an extended period of weather aberrations.

“In 2013, the Monsoon arrived early and left late. The prolonged rains disrupted cropping cycles, more so in vegetables where harvesting got delayed. The impact of it all got concentrated in November,” he said.

But now, with weather conditions stabilising, the positive effects of a good monsoon are being felt through increased vegetable arrivals across all mandis. “We are actually seeing a glut developing,” said Sahoo.

Onion-potato effect

The price turnaround in vegetables originated with onions, where Cyclone Phailin in October and the ensuing unseasonal rains led to the crop in Andhra Pradesh and Karnataka being harvested about three weeks late.

Once that crop started arriving, onion prices at Lasalgaon — the main reference mandi — fell from over Rs 50/kg in mid-October to Rs 17-18 by end-November and Rs 9-10 at present.

Next to follow was potato, where prolonged monsoon rains pushed forward the normal late-September/early-October Rabi sowings by 15 days.

“For a country that consumes one lakh tonnes daily, it meant meeting the demand for that unforeseen extra 15 days from the earlier crop kept in cold storages. Prices, therefore, spiked in November,” said Hemant Gaur of Siddhivinayak Agri Processing, a potato supply chain company.

But with the same late-sown 90-day crop starting to arrive, wholesale prices in Agra halved from Rs 13.5-14 to 7-7.5/kg between November and now.

Once onion and potato prices fell, the effects have spilled over to other vegetables — a “normal cross-price elasticity of demand phenomenon,” as Gaur pointed out.

(This article was published on January 19, 2014)
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