AIRLINK 62.48 Increased By ▲ 2.05 (3.39%)
BOP 5.36 Increased By ▲ 0.01 (0.19%)
CNERGY 4.58 Decreased By ▼ -0.02 (-0.43%)
DFML 15.50 Increased By ▲ 0.66 (4.45%)
DGKC 66.40 Increased By ▲ 1.60 (2.47%)
FCCL 17.59 Increased By ▲ 0.73 (4.33%)
FFBL 27.70 Increased By ▲ 2.95 (11.92%)
FFL 9.27 Increased By ▲ 0.21 (2.32%)
GGL 10.06 Increased By ▲ 0.10 (1%)
HBL 105.70 Increased By ▲ 1.49 (1.43%)
HUBC 122.30 Increased By ▲ 4.78 (4.07%)
HUMNL 6.60 Increased By ▲ 0.06 (0.92%)
KEL 4.50 Decreased By ▼ -0.05 (-1.1%)
KOSM 4.48 Decreased By ▼ -0.09 (-1.97%)
MLCF 36.20 Increased By ▲ 0.79 (2.23%)
OGDC 122.92 Increased By ▲ 0.53 (0.43%)
PAEL 23.00 Increased By ▲ 1.09 (4.97%)
PIAA 29.34 Increased By ▲ 2.05 (7.51%)
PIBTL 5.80 Decreased By ▼ -0.14 (-2.36%)
PPL 107.50 Increased By ▲ 0.13 (0.12%)
PRL 27.25 Increased By ▲ 0.74 (2.79%)
PTC 18.07 Increased By ▲ 1.97 (12.24%)
SEARL 53.00 Decreased By ▼ -0.63 (-1.17%)
SNGP 63.21 Increased By ▲ 2.01 (3.28%)
SSGC 10.80 Increased By ▲ 0.05 (0.47%)
TELE 9.20 Increased By ▲ 0.71 (8.36%)
TPLP 11.44 Increased By ▲ 0.86 (8.13%)
TRG 70.86 Increased By ▲ 0.95 (1.36%)
UNITY 23.62 Increased By ▲ 0.11 (0.47%)
WTL 1.28 No Change ▼ 0.00 (0%)
BR100 6,944 Increased By 65.8 (0.96%)
BR30 22,827 Increased By 258.6 (1.15%)
KSE100 67,142 Increased By 594.3 (0.89%)
KSE30 22,090 Increased By 175.1 (0.8%)

In last week of May 2020, consumers in Lahore witnessed cheapest prices of tomatoes in at least past five years, falling below Rs 25 per kg. But the bonhomie did not last too long – in five weeks, prices more than doubled. By end of November, the same fleshy vegetable was selling for as high as Rs 175 per kg in the provincial capital.

That supply of tomatoes suffers from most price volatility among staple vegetables is hardly surprising, considering its naturally low shelf life. But what is most surprising about the inflationary spiral in food prices – beginning April 2019 – is that the volatility (at both extremes) – in prices of perishables has generally increased, leaving consumers worse off. Why? Because most consumers do not have the purchasing power to pile up stocks, never mind the intuitiveness of the “buy when prices are low” home economics principle.

What’s worse is that prices of onions and potatoes – commodities that score comparatively well on the perishability scale – suffered from similarly higher levels of volatility in 2019. Back in Feb-19, onion prices were at their lowest levels in two years yet climbed to their highest ever in the following 10 months. The curious case of spuds was no different.

Now that the inflationary cycle is calming, will the volatility in perishable prices also settle down? It is hard to say. Consider that the volatility level was similarly high back in CY17 as well when food inflation level was under 3 percent. Clearly, there is more at play here than prices adjusting to cost-push in input prices in the aftermath of currency devaluation.

Which is where things get interesting. Consider that the periodic price crash takes place well within a quarter of peak price levels (on average). Why? Because prices climb as supply shortfall builds up few months before expected harvest; traders belatedly initiate imports after operating on wait-and-see basis fearing early harvest; followed by sudden price crash once peak import volumes coincide with fresh domestic crop reaching wholesale mandis.

The real losers? Of course, consumers, who can never take advantage of low prices beyond buying a maund worth of potatoes or onions, but most importantly, the producers, who are failed by markets not fulfilling their primary role.

Is this a call for increased administrative intervention? Not exactly. But clearly, some impetus is needed to encourage storage facilities, not only for domestic supply chain, but also for importers who given the right infrastructure, can take advantage of weak prices in international market and stabilize prices domestically by ensuring timely supplies.

That the prices of all three staple vegetables have witnessed their lowest lows and highest highs in the past 24 months indicates less a role of currency adjustment and more a result of increasing uncertainty in supply-side forecast. If that is due to increasing vagaries of climate and changing sowing/harvest patterns, the challenge may only exacerbate in coming years, even if general inflationary trend dies down. That does not bode too well for a government banking on a reversal in food inflation in 2021.

Comments

Comments are closed.