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Prices of vegetables & spices crash upto 20% due to the brisk start to monsoon -Sutanuka Ghosal
-The Economic Times


KOLKATA: Prices of vegetables and spices have dropped up to 20% in the past month and are likely to remain low as higher output along with the brisk start to the monsoon has calmed the market.

The drop in vegetable prices, on top of the global fall in various commodities from aluminium to zinc, is good news for policymakers as stubbornly high inflation has hindered moves to cut interest rates. Expectations of higher farm output after last year's slump would also boost overall economic growth, economists said.

The fall in vegetable prices in the past month has been the steepest in recent times. Prices had shot up in previous years because of erratic rainfall, particularly in 2012 when rainfall was 30% below normal in June.


"Prices of most vegetables have fallen because productivity has increased this year. Most farmers in south India and Maharashtra have used low-cost drip irrigation, raising the moisture level of the soil by 50-75%. Prices are not expected to go up this month. And if monsoon remains normal, we do not foresee prices to climb," said Shriram Gadhave, president of the All India Vegetable Growers Association.

In the wholesale market, vegetable, chana, spices and poultry feed fell 15-20% over the last weekend.

At the retail end, prices have dropped 8-10%. In Delhi's Azadpur mandi , Asia's largest wholesale market, prices of vegetables have declined as arrivals have improved from neigbouring states. "Production has been good in the adjoining areas of Delhi and arrivals have improved. Prices at the wholesale level are down 15-20%," said Subash Chugh, owner of Subash Vegetable Trading.

In Delhi's wholesale market, prices of vegetables ranged from Rs5-8/kg for cucumber to Rs3-6/kg for pumpkin and Rs6-7/kg for onion. In Kerala, where the monsoon arrived on June 1, prices of farm commodities have started moving downwards. Jitin Raj, owner of vegetable trading firm Amal Traders, said: "Vegetable prices have gone down at least 10-15%. The cooling-off effect will continue if the monsoon remains good."

In Bengal, prices of most vegetables have come down except tomato. Soumen Manna, a vegetable trader from Kolkata, said tomato prices are high as the local crop has dwindled. With the Met department declaring onset of monsoon in Kerala as per schedule, it had a notable effect on chana prices, which fell from Rs3,600 per quintal toRs3,200 per quintal in a month.

There are still no short-term bullish reports from the traders. The news of a good monsoon has impacted the jeera market as well even as overall fundamentals remained moderately firm for the commodity. Traders said higher production prospects too are likely to keep pressure on market sentiments with good sowing reports from Gujarat and Rajasthan. In the beginning of May, jeera was around Rs13,100 per quintal and is hovering around that level only. Traders hope prices may inch up if export enquiries come from Syria and Turkey.

Turmeric, another major spice, has tumbled in the last one month. Prices of turmeric are currently hovering around Rs5,670 per quintal compared with Rs6,500 per quintal a month ago. Poultry feed prices too have climbed down to Rs25 per kg from Rs32 per kg a few months ago. This will also bring down chicken prices that have shot up in recent months. Ajitesh Mullick, AVP, Religare Securities, said: "The initial report on the monsoon front has been excellent. Now, it would be critical to see how the monsoon progresses over the rest of India.

The sectoral distribution of the rains would be important. The southern states - Kerala, Tamil Nadu and Karnataka - have been receiving low rains for quite some time. Also, drought-like situations persist in some areas in Maharashtra and Gujarat.

It is very important for these crucial states to receive high rainfall this year." Mullick said though these are very early estimates, and going by the erratic nature of the monsoon progress in recent years, anything can happen - yet the early signals are positive not just for the Indian agricultural sector, but also for the economy as a whole. Agriculture had grown at a very low rate of 1.80% in 2012-13 due to deficit rains.

"This has affected the growth of the economy also and resulted in double-digit Inflation last year. Timely arrival of rains from June this year could help bring some relief to everyone. With prices of petrol and diesel on the rise, agri commodity rates have also generally been on the rise. Better sowing of kharif crops from June onwards could result in better production of foodgrain and pulses, leading to prices cooling off in the near term," he said. Inflation in food articles, which have a 14.34% share in the WPI (wholesale price index) basket, came down to 6.08% in April.

Inflation in this category was at 8.73% in March. The easing in food inflation was helped by a sharp drop in prices of vegetables. Inflation in vegetables stood at (-)9.05% in April, against (-)0.95% in the previous month. Inflation in fruit declined to 0.71% during the month compared with 4.71% in March.