Food Inflation Could Force Government To Review Food Exports Policy.

NEW DELHI: Global food prices are up 33% in July from a year ago, says a World Bank report. It warned that stocks are at 'alarmingly low' level, but said the supply has improved since April.

The World Bank's Food Price Index shows prices of a number of food commodities have increased sharply over the last twelve months. Prices of maize were up 84% in July from a year ago, sugar 62%, wheat 55% and soybean oil 47%.

"Coupled with the fact that the realisation of the forecast yields is itself contingent on benign weather conditions in the major exporting countries, the low stock environment has created a situation in which even small shortfalls in yields can have amplified effects on prices," the World Bank said in its report.

The stocks-to-use ratio for maize is only 13%, lowest since the early 1970s. Wheat and (milled) rice stocks also remain well below their late 1990s and early 2000 levels, the Bank notes.

The global spike in food inflation could force India to review its food exports policy. The government has gingerly opened rice and wheat exports after food inflation had moderated to less than 8%, but in recent weeks it has accelerated again to nearly 10%.

Food prices in India have been mostly insulated from the world due to restrictions on exports and abundant grain stocks. "In terms of food grains, India is relatively insulated from global prices because it doesn't allow exports," said Ashok Gulati, chairman, Commission for Agricultural Costs and Prices. "But this situation can't continue for long.

The farmers must be allowed to reap the benefits of higher prices because their costs have gone up," he added advocating the opening up exports in a calibrated manner.So far, the government has only allowed limited export of one million tonne (MT) non-basmati rice, 1.5 MT sugar and an unspecified amount of wheat to prevent any speculative flare-up in prices.

Food grain stocks are also at unmanageably high levels. At the beginning of August the country had food stocks of over 61 million tonnes.

Source : economictimes.indiatimes.com