The SPI has been on a decline. The number is in red for four out of the last five weeks. The index is down by 1.1 percent over the past five weeks. It is down by 0.23 percent in the latest recording. The decline on weekly basis is mainly due to a fall in food prices such as tomatoes (10.8%), onions (8.2%), potatoes (7.8%) and sugar (7.6%). On the other hand, items like chicken eggs and vegetable ghee are on the rise.
Food inflation is a pain for the government and is hurting the poor. Food inflation is growing for various reasons explained numerous times in this space. What is interesting to note is that international cereal and cooking oil indices are sharply moving up. In the last month, there is significant increase in the international prices.
Other than government inefficiencies in case of not timely importing wheat and sugar, locust attack, currency depreciation and climate change, pandemic has its own spiral impact on food inflation. But it has global movement traces too, and more are still to come.
In the first half of this year, due to global lockdowns, there was suppression in demand and commodity prices went south – including food. In response, framers across the globe didn’t go for higher production this year. Farmers didn’t make good money in the last crop to buy inputs for the next crop and there were surplus stocks in some cases. But now with recovery in demand, there is shortage of supply. That is especially true for cereals and cooking oil – FAO food index is up by 3.9 percent in November over the prices in October – that is a big jump, and upward movement continues in December.
In Pakistan, the bad luck of the PTI government on food never seems to be ending. Readers know well what happened in wheat, sugar and vegetables. The price spiral impact is coming into poultry – (read "What’s going on with maize prices"). The next wave could be in the vegetable ghee segment.
From its low in May 20, the cooking oil index is up by whopping 57 percent by Nov. Pakistan’s consumption mainly relies on palm oil. It is an imported item. Not much can be done domestically to tame prices but by lowering marginal taxes – which the government might do soon. The cooking oil prices are ought to move up in Pakistan- vegetable ghee prices are already up by 17 percent year on year.
There might be some respite on foods items such as wheat, sugar and vegetables as the prices had already moved up significantly; but the wheat prices internationally are still on a north journey. The government was criticized in the media for not importing earlier in summer when prices were too low. But the upward slope is now getting steeper. Even the government existing tenders (some import came and other is on way) are looking better. The coming headache is of cooking oil.