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Less than a month after the painful fuel and power price adjustments came into play, major cereal grains are up 12.6 percent on average. The three heavyweights constitute nearly 4 percent of the Wholesale Price Index, dragging monthly rise for agri-commodities sub index by 4.2 percent.

According to latest inflation data from PBS, cereal grains including wheat, maize and rice rose by nearly 30 percent year on year by June 2022. An across-the-boarddouble-digit rise in all cereal prices is a break from all past trends, andsignals dangerous outlook for stability of essential food prices.

Regular readers of this space will recall that BR Research had fired warning shots over cereal prices running amok as early as last winter.(For more, read: “Food prices: is basmatinext?” published on 13 Dec 2021).Noting the healthy rise in basmati exports (which are forecast to rise by 20 percent for full year FY22), this section had noted that while the increase in export quantum is not necessarily spectacular or alarming, it has come on the back of over 10 percent decline in local basmati output, which was bound to create stress on local grain prices sooner or later.

And the 20 percent rise in headline rice prices (WPI) masks what’s going on underneath. The WPI index clubs rice prices for both basmati and non-basmati varieties, where the latter has managed to create a false sense of calm. According to wholesale mandis data from Punjab government, super basmati prices are in fact up 44 percent in Faisalabad grain market (year on year). The terrifying rise in basmati prices beats yearly rise in even wheat prices, which rose by one-third as per both PBS and Punjab government – and where an actual shortfall is underway.

If basmati bonanza were the only cereal that had gone bonkers, the prospective lagged impact on retail consumer prices of kitchen essentials may not turn out to be as stupendous. However, even maize prices have leapt ahead by 37 percent year on year, trailing behind basmati by only a fraction.

Although the spiral in maize prices may appear to be an outcome of Russia-Ukraine conflict, that’s only part of the whole story. According to Punjab government’s grain markets data, maize prices were already up 30 percent between June-21 and Feb-22, ahead of Russian invasion of Ukraine. Maize prices have already been under upward pressure globally since last calendar year. In fact local processors had already exported maize worth $150 million during 10MFY22, up from a trickle in yesteryears.(For more, read: “Grain prices: is maize next”, published on 17 March 2022).

The phenomenal rise in non-perishable portion of the food basket means a lot more pain is yet to come for local consumers. Rise in WPI prices indicates that the price spiral will not only hit consumer prices of these commodities directly - but given their widespread use for feed preparation for both poultry and cattle – soon translate into significantly higher prices for meat and dairy. Difficult times are ahead that will massively erode purchasing power of domestic consumers in ways not seen in a long time – especially for kitchen essentials. Clearly, fuel and power price adjustments mark the beginning of the much darker times ahead!

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