Food prices to stay high on supply constraints

Edible oil, pulses prices have flared up, leading to collapse in domestic budgets

Prices of sta ples and FMCG goods ar e going up due to supply bottlenecks and a jump in raw material costs, and the consumer is finding it a doub le w hammy given that real income is coming down.

The extent of retail price increase in the post-loc kdown period w as muc h higher than the usual summer up tick in f ood prices , accor ding to the RBI’ s annual report.

“Pressures from food items lik e pulses and edible oils are likely to persist in view o f sup ply-demand imbalances , while cer eals' prices ma y contin ue to soften with the bumper foodgrains production in 2020-21," RBI said.

Edible oil prices have hit record highs with so yabean oil prices c limbing to nearly Rs 150 a kg and sunflower oil to Rs 170.

Retail price of g ram incr eased to Rs 80 per kg on May 14 from Rs 60 per kg a year ago, tur rose to Rs 110 per kg fr om Rs 90 per kg, while urad to Rs 105 per kg from Rs 100 per kg and masoor dal to Rs 80 per kg from Rs 72.50 per kg.

Prices of pac kaged consumer goods such as soaps, detergents, soaps, tea, oil have gone up as ra w material prices and logistics logistic costs have risen.

However, the situa tion is b leak a t present. R eal income has dec lined as GDP has f allen a nd inf lationary pr essure continues, said Arun Singh, Global Chief Economist a t Dun and Bradstreet. This has impacted consumer demand negatively.

“The rising fuel cost will ha ve a rip - ple effect on logistics costs. When transportation costs go up, the selling price is bound to g o and will b e passed on to the consumer,” he said.

Edible oil p rices have risen over 62% in a year. If one were to look at edible oil prices on a y ear-to-year basis, they ar e witnessing new highs.

The price of crude oil affects the packaging costs, which now v aries ar ound 7.5% to 8%, f or FMCG products, said Abhijit Kundu, vice president, Antique Broking. And the ricoc heting ef fect will be felt on the prices of finished goods. Some k ey ra w ma terials lik e palm oil, sug ar and co pra sho uld see some amount of inflation, he said.

However, there can b e a r espite soon. The prices a re expected to cool do wn due to a good monsoon, loc kdown r estrictions easing and vaccinations.

Sunand Subra maniam, Senior R esearch Associate, Choice Broking, said edible oil prices ar e lik ely to come down in the next tw o months if the monsoon is good like last year, but cautioned that prices may bounce back in the festi ve sea son (A ugust onwards) and reach new highs by end of the year.