According to the latest data from the Food and Agriculture Organisation (FAO) price index, global food prices rose for the eighth consecutive month in January, hitting their highest level since July 2014, possibly benefiting farmers while potentially stoking domestic inflation. Analysts agree that higher food prices would complicate the country's ongoing economic recovery.
Higher foreign food product prices are improving India's food exports, but they would increase the cost of food imports. For example, 70-74 percent of the country's vegetable or edible oil requirements are met by imports.
According to the UN department, the FAO's food price index, which calculates monthly adjustments for a basket of cereals, oilseeds, dairy products, meat, and sugar, averaged 113.3 points in January 2021, up 4.7 points (or 4.3 percent) from December 2020.
This is not only the eighth month in a row that the index has increased, but it is also the highest monthly average since July 2014. Sugar, cereals, and vegetable oils also saw price changes, while meat and dairy products also saw increases.
China has a cereal stockpile. Argentina has stopped export shipments of maize. Russia has levied tariffs on wheat, barley, and maize products, placing downward pressure on prices.
An increase in edible oil prices would have the biggest effect on India. According to Abhishek Agrawal of Comtrade, a commodity trading company, India imports 70% of its edible oil and is facing serious foreign shortages. In January, the FAO's vegetable oil price index averaged 138.8 points, up 7.7 points or 5.8% from December and the highest since May 2012.
According to Agrawal, lower palm oil production in Indonesia and Malaysia is to blame. Sugar prices have increased by 8.1 percent as a result of lower demand in the European Union, Russia, Thailand, and South America. However, the sharp increase in commodity prices has accelerated India's commodity exports.
Sugar prices have increased by 8.1 percent as a result of lower demand in the European Union, Russia, Thailand, and South America.
However, the sharp increase in commodity prices has accelerated India's commodity exports. Cotton has risen in price by a quarter percent in foreign markets, leading the Cotton Corporation of India to predict brisk exports of lower-cost fabric from India. According to the Cotton Corporation of India, cotton shipments in India are forecast to increase to 75 lakh bales (each weighing 170 kg) this year, up from 50 lakh bales last year.
Domestic soyabean prices are currently 10% above minimum support prices, thanks to high exports, according to Agrawal. Increased foreign demand for maize, wheat, and soybeans, as well as price increases, could help Indian farmers.
According to official data, India's basmati and non-basmati rice exports are estimated to be about 17 million tonnes this fiscal year, up from 9.5 million tonnes the previous fiscal year, with an 80 percent growth in exports between April and December 2020.
