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<ul><li>Food inflation was the major driver of June CPI which hit a three-month high.</li><li>Tomato price inflation was at 64%, onions at 8.1%, and potato at 10.5% on a sequential basis.</li><li>Retail prices of pulses reported double-digit growth for the third consecutive month.</li><li>On a sequential basis, wheat and rice inflation also picked pace in June. </li></ul>India’s <keyword id="513422" type="General" weightage="20" keywordseo="retail-inflation" source="Orion">retail inflation</keyword> is at a three-month high in June at 4.8%, but it may not have reached its peak yet. Many climate related factors have been playing havoc with food inflation, and with most of North India under floods and this will only add to the pinch on the pocket, economists have warned. “Nine states had inflation above the average while six had above 5% — UP, Uttarakhand, Rajasthan, Kerala, Bihar and Haryana. The recent floods and landslides in the North will tend to push up inflation further in these states on the food side — especially vegetables and fruits which can add another 0.2% to headline inflation,” said Madan Sabnavis, chief economist at Bank of Baroda. Food inflation is a heavyweight in consumer price inflation (CPI), and drove it up in June, even as core inflation cooled as compared to the last month. “Food inflation was the major driver for higher headline inflation print; up by 218 basis points month-on-month versus 67 basis points in the last month due to a 12% hike in vegetables prices,” said a report by Phillip Capital. Price shock: Grains join tomatoes Vegetable prices however are on top of everyone’s minds, and it could get worse as prices of tomatoes refuse to inch down. In June, its prices went up by 64%. But other key vegetables like onion were high too at 8.1%, and potato at 10.5% – on a sequential basis. A report by SBI Ecowrap says that the past 10 years data shows that tomato price increase alone did not influence the overall CPI inflation much — except when it is accompanied by substantial increase in price of potato and onion. “We believe if tomato price increase without any substantial change in potato and onion then average inflation in Q2 FY24 will come near 5.8% yoy but if the TOP (tomato, onion, potato) inflation increases, then CPI might come around 6% yoy in Q2 FY24. Accordingly, average CPI for FY24 will vary between 5.2-5.4%,” says SBI Ecowrap. Grains are not too far behind either. Cereal and pulses inflation remained elevated in June at 12.7% y-o-y and 10.5% y-o-y, respectively. Retail prices of pulses, especially that of tur dal, have risen 24% y-o-y in June, reporting double-digit growth for the third consecutive month. Moreover, the<a href="https://www.businessinsider.in/india/news/india-sows-more-millets-and-less-rice-this-kharif-season/articleshow/101642365.cms"> sowing in rice and pulses is lower this Kharif season</a> due to delayed monsoons, and that doesn’t bode well for their prices which too are seeing upward pressure. “On a sequential basis, wheat and rice inflation also picked pace in June. Looking ahead, the sale of wheat and rice from the government’s buffer stock via Open Market Sale Scheme (OMSS) auctions could help cool retail prices of rice, wheat and atta. However, with regards to rice prices, deficient monsoons in West Bengal, a key rice-producing state, could impact sowing, putting upward pressure on prices,” said a report by CareEdge. Milk inflation moderated in June to 8.6% as compared to 8.9%. But it continues to remain sticky above 8%, reeling from the impact of a continued demand-supply mismatch and high fodder costs. “Milk prices could remain higher in the coming months, if unabating cereal inflation keeps cattle feed expensive,” CareEdge says. WPI is comforting, say experts RBI insisted in the last two monetary policy committee meeting updates that its decision to hold key interest rates is a pause not a pivot. Most experts had been hoping that it would go for rate cuts in the second half of the year, but the inflation picture is <a href="https://www.businessinsider.in/finance/news/with-inflation-cooling-rbi-may-slash-interest-rates-by-50-bps-this-financial-year/articleshow/100531780.cms">putting cold water on their hopes</a>. “While food prices will create inflationary pressures in the upcoming months due to uneven distribution of monsoon and lower kharif sowing, RBI stance would not be solely contingent on seasonal food inflation,” said Phillip Capital. Even at 4.8%, inflation is within the tolerance band of RBI, which is 4-6%. “The RBI will keep a keen eye here and it is almost given that nothing will change in the policy next month. More caution will be expressed on the inflation front,” said Sabnavis. CareEdge however says that wholesale price inflation (WPI) has been contracting and that is offering some comfort. India’s WPI has been in a deflationary zone for the second month in a row in May, as prices contracted by 3.48%. “Deflation in WPI will have a lagged impact on CPI inflation going forward. Having said that, RBI would remain cautious and adopt a wait and watch mode. We reaffirm our view that RBI would maintain an extended pause in 2023,” said CareEdge.

Inflation to inch higher still? Incessant rains will add to woes, warn economists

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<ul class="summary-list"><li><keyword id="11906678" type="UNKNOWN" weightage="60" keywordseo="thailand" source="Orion">Thailand</keyword> and <keyword id="11906679" type="UNKNOWN" weightage="60" keywordseo="vietnam" source="Orion">Vietnam</keyword> — two of the world's top <keyword id="11909002" type="UNKNOWN" weightage="60" keywordseo="rice" source="Orion">rice</keyword> producers — are talking about hiking prices.</li><li>Thailand's government spokesperson said they are aiming to increase farmer income and bargaining power.</li></ul>Two of the world's top rice producers are in discussions to raise prices together, <a href="https://www.reuters.com/article/thailand-vietnam-rice/update-1-thailand-aims-for-pact-with-vietnam-to-raise-rice-prices-idUSL2N2XJ0GG">Reuters</a> reported, citing Thai government spokesperson Thanakorn Wangboonkongchana."We aim to raise rice prices, increase farmer income and increase bargaining power in the global market," Thanakorn said on Friday, per Reuters. "The rice price has been low for more than 20 years while the cost of production has been increasing."Thailand and Vietnam are the world's second- and third-largest rice exporters after India. A price increase in the staple grain would be bad <keyword id="11893589" type="UNKNOWN" weightage="60" keywordseo="news" source="Orion">news</keyword> for billions of people across the world, especially as it comes on top of soaring <a href="https://markets.businessinsider.com/news/commodities/wheat-prices-soar-over-4-india-bans-exports-commodities-2022-5">wheat</a> prices.Thai Commerce Minister Jurin Laksanawisit told reporters on Friday that the country's rice exports are getting a boost this year due to a recovery in global demand and as the country's currency falls to a five-year low against the US dollar, which is used in the trade of commodities internationally, per <a href="https://www.bloomberg.com/news/articles/2022-05-27/thailand-wants-to-join-hands-with-vietnam-to-control-rice-trade">Bloomberg.</a>Vietnam's agriculture ministry did not immediately respond to Insider's or Reuters' requests for comments.Vietnam's <keyword id="11894142" type="UNKNOWN" weightage="60" keywordseo="food" source="Orion">Food</keyword> Association played down the prospect of measures to boost prices ahead of a June meeting with its Thai counterparts."The meeting will focus on measures to cooperate in sustainable food production," Nguyen Ngoc Nam, the chairman of Vietnam's Food Association, told Reuters. "It's not reasonable to talk about raising or controlling rice prices at this time when the global food price is on the rise."Neither Thailand nor Vietnam are facing a shortage in rice supply this year, according to data from the <a href="https://www.usda.gov/oce/commodity/wasde/wasde0522.pdf">US Department of Agriculture.</a> However, like in many countries, inflation in both countries has risen sharply in the last year, putting pressure on the government to soften the impact on their populations. About 30% and 40% of the population in <a href="https://thailand.un.org/en/103307-thai-agricultural-sector-problems-solutions">Thailand</a> and <a href="https://www.fao.org/3/cb3956en/cb3956en.pdf">Vietnam</a> respectively are employed in the agricultural sector, according to the United Nations.Consumer prices in Thailand are hovering around a 13-year high, having gained 4.71% on-year in April, according to data from the country's <a href="http://www.indexpr.moc.go.th/price_present/cpi/data/index_47_e.asp?list_month=04&amp;list_year=2565&amp;list_region=country">Commerce Ministry.</a> Prices in Vietnam rose 2.86% on-year in May, according to data from the <a href="https://www.gso.gov.vn/en/cpi/">country's statistics office.</a>But consumers could turn to other major exporters for rice — like top exporter India — for supplies."If Thailand and Vietnam try to jack up the prices, obviously price-sensitive buyers in Africa will shift towards India," B.V. Krishna Rao, president of the All India Rice Exporters Association, told Reuters. He said neither country has approached India about participating in a rice cartel, Reuters reported.Benchmark export prices for Thai rice have averaged $420 a metric ton this year — 16% higher than India's $363 a ton, per Reuters. Indian trade and government sources told <a href="https://www.reuters.com/world/india/india-has-no-plans-curb-rice-exports-local-supplies-surge-2022-05-26/">Reuters</a> on Friday that there were no plans to limit rice exports.

2 of the world's top rice producers are reportedly in discussions about hiking prices, and it's bad news for buyers

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Inflation to inch higher still? Incessant rains will add to woes, warn economists

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2 of the world's top rice producers are reportedly in discussions about hiking prices, and it's bad news for buyers

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