Global food prices fell 8.6 per cent in July over the previous month. This was the steepest monthly decline for the UN Food and Agriculture Organisation’s (FAO) benchmark price index since October 2008. What it hopefully suggests is an end to “peak inflation” triggered by successive supply-side shocks within the last two years or less. These include extreme weather events, Covid-19, war and export controls. The pandemic is no longer coming in the way of the movement of people and cargo. Most countries — notably Indonesia, the world’s biggest palm oil supplier — have lifted or relaxed curbs on farm produce shipments. India has, wisely, not banned exports of cotton or rice, after doing so in wheat and sugar (by imposing a quantitative cap that has now been raised). As for war, the good news is the resumption of grain exports from Ukraine’s Black Sea ports and Russia agreeing not to target ships in transit.
That leaves the fourth factor — climate shocks. They are here to stay. Take India, which last year registered five consecutive excess rainfall months from September to January. These not only resulted in inundation of the kharif crops at the time of their harvesting, but also impacted yields of the rabi mustard in flowering/pod development stage during January. Worse followed when temperatures suddenly spiked from mid-March, singeing the standing wheat and causing premature grain ripening. Things look better this time, at least so far. Monsoon rainfall was deficient in much of the country during June, but has recovered to notch up a cumulative surplus of 7.7 per cent as of August 10. Overall, kharif sowing has been satisfactory. More area under soyabean and cotton, plus the rains, should translate into improved feed and fodder availability for livestock and poultry. Acreage shortfalls in rice and pulses can be covered by surplus carryover stocks (especially of the former) and imports (for the latter). Also, rice is grown both during kharif and rabi, and in a wider geography than wheat.
On the whole, today’s situation is far less grim than in March, after Russia’s invasion of Ukraine and when the FAO’s food price index hit an all-time high. Back home, if the monsoon delivers reasonably, as it has, in the remaining part of this month and the next, the benefits would flow to the ensuing rabi crop as well. The RBI will, then, have no reason really to further hike interest rates. Given that food items have a 45.86 per cent weight in the consumer price index, relief on this front is practically half the battle won.