Supply chain woes making food expensive

Vishwanath Kulkarni/Rutam Vora Bengaluru/Ahmedabad | Updated on April 07, 2020 Published on April 07, 2020

Hike in freight rates, labour shortage add to costs despite adequate stocks

The disruption in food supply chain triggered by the lockdown has started influencing prices of various staples such as pulses and edible oils.

Over the past fortnight, the retail prices of essential of food commodities have moved up to a certain extent. According to the Ministry of Consumer Affairs data, the spike in prices mainly felt in various pulses and edible oils, while other staples such as rice, atta and sugar are largely stable.

Trade sources attribute the firming trend in prices in the open market to the increase in freight rates due to shortage of vehicles for maintaining supplies from producing regions to consuming centres. In the peak rabi season, farmers are finding it difficult to harvest and sell their produce, while processors are having tough time sourcing raw material.



Though restrictions have been eased for transportation of essential commodities from March 30, suppliers continue to grapple with an acute labour shortage. Most of the processing units are operating at less than third of their capacity. “Availability of labour and transport is only 30 per cent, while the logistics costs have doubled,” said RC Lahoti, President of Bengaluru Wholesale Foodgrain and Pulses Merchant Association. Freight rates have shot up as the lorries have to return empty after delivering the supplies.

“We have seen a sharp spurt in demand in a very short span of time, which has resulted in prices to go up by 3-4 per cent at wholesale level,” said Zaverchand Bheda, Chairman, Indian Pulses and Grains Association. Bheda also said there was an unusual spurt in demand primarily for chickpea, tur dal and red masoor dal. The rise in prices is sharper at the retail level, which is attributed to panic buying and change in diet preferences of non-vegetarian consumers towards pulses amid the virus infection scare from meat items.

However, analysts see this trend of spike in prices not lasting too long. “There is some disruption, but over period of time prices will get smoothened as the rabi crop is good and we have huge stocks. As of now, our assessment is that food inflation should not be a problem.” said DK Joshi, chief economist, Crisil.

While the rice millers are finding it difficult to move stocks to wholesalers in Telangana, the trade in West Bengal expects the prices of the cereal to go up by 5-10 per cent due to the additional costs retailers have to bear in bringing out the stocks from wholesale markets. The price of certain varieties of rice has increased only marginally, said Nilesh Vira at APMC Navi Mumbai.

The edible oil prices have jumped in the range of ₹160-220 or in the range of 9-16 per cent per 15 kg pack in past 20 days. The Gujarat State Edible oil merchants' Association data reveals sharp jump in the prices of cottonseed oil, groundnut oil and sunflower oils.

Cottonseed oil, which quoted ₹1,380 per 15 kg in wholesale market on March 18, jumped to ₹1,550-1,600 on Tuesday April 7 indicating a sharp ₹220 jump per 15 kg tin. Similarly, groundnut oil prices increased from ₹2,200 to ₹2,400 per 15 kg tin during the 20-day period. Also, sunflower oil prices reported a rise of ₹160 per 15 kg tin from ₹1,420 on March 18 to ₹1,580 on Tuesday.

“Transport disruptions are getting in order now. Also, the oil mills that had suddenly stopped functioning after the lockdown pronouncements, have resumed operations. And the millers have started to get the raw materials i.e. oilseeds for crushing from the government auctions. So, we had seen a temporary spike in the edible oil prices at wholesale level. But it looks that we have attained peak and there is no further upside for edible oils,” said a leading oil miller in North Gujarat.

He also acknowledged that after a temporary rush for oil purchases during the initial days of the lockdown, there is a slowdown in demand in recent days. “Most people have either made stocks for few months. So there does not seem to be any sharp surge in demand from here onwards. This softening in demand will also affect the prices,” he added.

(with inputs from Shobha Roy in Kolkata, KV Kurmanath in Hyderabad, Rahul Wadke in Mumbai, Radheshyam Jadhav in Pune and Vinson Kurian in Thiruvananthapuram)

Published on April 07, 2020

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