Domestic Demand And Logistical Flaws To Affect Food Prices (24-Feb-2010)
The prices of few agricultural commodities like - wheat, chana and arhar dal, soyabean and soyaoil, mustard, sugar and eggs have come down as compared with the peaks they hit towards the end of 2009.
Post-March, when the rabi marketing season (RMS 2010-11) will begin, both the wholesale and retail prices of several farm commodities are likely to reduce further in tandem with the steady arrival of the new crop in mandis.
Until the first conclusive reports of Khariff 2010 farm output becomes clear, volatility in prices of the food commodity will continue through the year and may be felt especially towards the latter half of 2010 and early 2011.
Commodity analyst cautioned that while select farm commodity prices will tend to show price softening for a period of time, the volatility in prices of retail are expected be highlighted throughout the year, more so as the RMS draws to a close, mainly due to domestic demand and output/distribution problems rather than global price fluctuations. Global price instability for food commodities may have very little to do with fluctuations in domestic prices, quite contrary to the Centre's arguments. Analyst said that volatility or instability in the prices of food will continue due to higher demand in the domestic market and a equally weak distribution network ensuring higher retail prices compared to the wholesale prices, even when global prices come down.
There are not enough short-term supply side measures or long-term strengthening of distribution logistics. Switching to the new nutrient-based subsidy scheme could add to higher price volatility.
He said ensuring that food prices remain on an even keel the year long depends heavily on governments incentivising a seamless farm-to-retail network apart from a strong buffer stock.
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