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Food Prices To Pinch During Festive Season

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Consumers are likely to feel the pinch of rising food prices in the upcoming festive season, as erratic rainfall in growing areas and thin stocks coupled with high demand could push up prices further.

Higher food prices during festivals may also create fresh problems for the government, which has been struggling over the past several months to contain inflation.

India's food price index rose 7.33 percent in the year to July 16, government data on Thursday showed.

The unexpectedly sharp hike in key rates by the central bank on Tuesday will also add to consumers woes.

"Festivals are there from next month. They will boost demand. We may see further rise in prices of edible oil and pulses," said Badruddin Khan, associate vice-president, research, at Angel Commodities Broking.

Patchy rainfall in central and southern India at the beginning of monsoon season and heavy rainfall in July in few areas delayed sowing and affected growth of some crops, lifting prices ahead of the festive season.

Muslims in India will celebrate the holy month of Ramadan in August, while the 10-day long Hindu Ganesh festival falls in September. October will ring in the Durga festival and also Diwali, the biggest festival for Hindus.

"Every year during festivals sugar demand goes up. Stockists have raised purchases in the past few days. Demand will remain robust," said Ashok Jain, president, Bombay Sugar Merchants Association.

Record high sugar prices in the world market and the government's decision to allow exports of additional 500,000 tonnes also contributed to the price rise in domestic market.

Rising vegetable prices are also disrupting household budgets.

Average onion price at the country's largest wholesale onion trading hub in Lasalgaon, in western Maharashtra state, has jumped 55 percent in two months on depleting stockpiles from last year's winter-sown crop and plantation delay this year.

Onion is a key ingredient in most Indian dishes. Soaring prices of the vegetable have helped dislodge Indian state governments in the past, and rising food costs often spark street protests.

Traders said vegetable supplies have been disrupted due to erratic rainfall and are unlikely to improve before September.

Spot prices of chana, or, chickpea, the most consumed pulse in India, have also risen 24 percent in the past two months, while chana futures are now close to their highest level in nearly five years.

Prices of other pulses like tur, urad and moong have also risen over 10 percent during the period while sugar and soyoil prices are up over 4 percent.

"Lower area under groundnut and firmness in international market are supporting upside in edible oils," Khan said.

India meets nearly half of its edible oil requirement through imports, mainly of palm oil from Indonesia and Malaysia.

In 2009 higher prices of pulses, especially tur, had made headlines in the country. This year chana is likely to pinch consumers.

"Carry-forward stocks (of chana) have depleted, but stockists' demand is rising due to festivals. In next two-three months chana may rise by another 10 percent," said Nitin Kalantri, a dal miller based in Latur, Maharashtra.

Industry officials also attribued the rise in chana prices to the lower area under under kharif, or, summer-sown pulses.

"Sowing of kharif has been lagging due to poor rainfall. It has been hardening pulses segment," said Ashwini Bansod, a senior analyst at MF Global Commodities India.

As on July 22, acreage under summer-sown pulses in India stood at 4.54 million hectares against 4.96 million hectares a year ago, the farm ministry data showed last week.

A 8 percent rise in support price of rice and permission to export 1 million tonnes of the grain allowed rice prices to gain over 4 percent in the past one month, while wheat was largely steady due to ample stocks.

(Reuters)


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