Hidden in plain sight: New food inflation data

livemint.com:

Mint explains. Food inflation shot up to 9.4% year-on-year in June—the highest in six months—from 8.7% a month earlier, led by a sharp increase in the prices of vegetables (up 29.3%), pulses (16.1%) and cereals (8.8%). For vegetables—short-duration crops and price-wise the most volatile component—a prolonged heat wave in May and June led to a supply shortfall and higher prices.

For pulses, prices have been on the boil for long—indicating a chronic supply crunch—because of a consistent drop in production due to multiple factors, including erratic rainfall. Pulse output was 10.2% lower in 2023-24, compared with 2021-22. The June-September monsoon is critical to food production.

June witnessed 11% deficit rains (compared with the 50-year-average) but due to ample showers in July, the deficit was down to just 2% as of 15 July. But this near-normal number hides regional imbalances—in 31% area, rains continue to be deficient while another 14% has seen excess rains. Meanwhile, agriculture ministry data shows that till 12 July, planting of Kharif crops had been completed in 58 million hectares, over half the normal planting area of 110 million hectares—with year-on-year higher planting of rice, pulses and oilseeds.

Wholesale food prices may soften next month due to a high base effect (food inflation last July was 11.5%), but erratic and extreme rains could keep them high for consumers. The encouraging Kharif planting data pertains to only non-perishables, to be harvested starting October. Excess rains in August-September could pose a risk for pulses and oilseeds.