Food prices steady, but is there a secret behind that?

More than two weeks after confiscatory demonetisation sucked cash out from the economy, the food market has remained by and large steady, rather deceptively so.

Published: 28th November 2016 05:13 AM  |   Last Updated: 28th November 2016 05:13 AM   |  A+A-



By Express News Service

More than two weeks after confiscatory demonetisation sucked cash out from the economy, the food market has remained by and large steady, rather deceptively so. This held true at small retailers and vegetable shops in the cities and towns that Express checked out.

There are small differences, but all marginal. The perishable commodities – tomato was a common casualty – did witness a downturn, but mostly due to stock clearance sale in the evenings. But the figures may not tell the full story. This is not stability, insist traders, who have been having few visitors and minimal sales. The fall in demand starts at 40-50 per cent and climbs higher for hawkers. It’s this decline in demand that is keeping the price steady, a perilous equilibrium.

Veterans in the trade who have learnt to look beyond the immediate told Express that the situation could change if cash does not return to the market in the next few weeks and if stocks dry up. What the low demand conceals are stories about farm produce that could not be brought to the market due to supply chain disruption following the cash crunch. In some cases, harvests have been postponed as the price offered is less than what is required to pay the farm hands.

Every acre that is not cultivated and every tonne of produce not reaching the market will add up to a sharp decline in supply in the coming months, the period when markets are hoping to stabilise with the expected arrival of currency. If the fears prove to be true, a price inflation may be around the corner.

Express does a status check across South India and Odisha on the impact of demonetisation on prices and sales of small retailers and vegetable and fruit shops.


What when the stocks are over?

Shibu B S

Two weeks into demonetisation of big currency notes, markets have been able to maintain steady prices. “Being a consumer state, Kerala depends upon other states for most of the essential commodities. Usually, wholesale dealers stock up goods by October-end, ahead of the Christmas season,” explained Ernakulam Broadway Shop Owners’ Association (BSOA) joint secretary Joseph D’Silva. But traders expect prices to go up in the coming month on the basis of the cash flow and arrival of stocks from other states.
“However, there is a dip in demand. For instance, a retailer who used to buy 500 kg of onion before demonetisation is now buying only half of that quantity,” D’Silva added. Another reason for the steady prices is that a major chunk of the transactions between wholesale dealers and retailers in Kerala is being done through credit. “The major crops produced here like coconut and pineapple and pepper have suffered a drop in its prices,” said P Solomon of Pushpa Stores, Ernakulam Broadway.


Sales down to 20 per cent

S Guru Srikanth

Markets in Vijayawada have gone into a freeze since the demonetisation of Rs 1,000 and Rs 500 currency notes. Merchant associations say business is not even 20 per cent what it used to be at this time of the year. However, there has not been much of an impact on prices of essential commodities. “Only volumes have come down. With no money in the market, outstanding payments, outstanding receipts and loans have been affected. The situation has impacted sales, particularly of perishable commodities,” said Vakkalagadda Bhaskar Rao, president of Vijayawada Chambers of Commerce and Industry.
In the first week after Prime Minister’s announcement, prices of vegetables fell by 10-20 per cent in the wholesale market, but rose slightly in the second week. On November 25, they were back to the same level as on November 8. Normally, prices surge when demand is high and/or supply is less. But with demand and supply plummeting, prices have been stable. Simply put, the market has come to a near standstill.


Rise in prices plus drop in sales

Hemant Kumar Rout

Unlike in the southern states, the currency crisis has resulted in a rise in prices of some essential commodities in Bhubaneswar as well as a drop in sales.
Prices of pulses and spices have increased by at least 10 per cent and that of wheat and flour by 20-25 per cent. However, there was no significant change in the prices of rice, potatoes, onions, milk, edible oils and poultry products.
In consonance with other states, Bhubaneswar markets have witnessed a reduction in prices of fruits and vegetables by 10-15 per cent and 20 per cent, respectively.  
The arrival of winter produce along with lack of consumer demand is helping to keep vegetables prices low. Some vegetables are now available at 30-50 per cent less.
Sudhakar Panda, general secretary of Federation of All Odisha Traders’ Associations, said the rise in prices of pulses, wheat and spices is due to supply chain kinks – mainly transportation problems – that have arisen due to demonetisation.




Consumers tight-fisted

J Deepthi Nandan Reddy

Barring a few exceptions, demonetisation has left prices of essential commodities untouched, but prices of perishable goods such as vegetables, fruits have decreased considerably. Vegetables such as tomatoes were in fact dumped in the Hyderabad markets last week as there were few takers. Consumers have either not been able to access small notes of valid currency or having gained access to such notes have been reluctant to part with them.
This tight hold on cash has badly affected vegetable and meat sales and prices. For instance, tomatoes sold at Rs 20 per kg before demonetisation are now available for Rs 10. Prices of other vegetables have also dropped as sellers lowered prices to dispose of produce. “Buyers have become scarce,” said Mohammed Ibrahim, a vegetable vendor at Mehdipatnam in Hyderabad. Further, due to rumours and apprehensions of transport being affected post-demonetisation, the price of salt touched Rs 60 immediately after November 8. However, the situation soon returned to normal.


DIp in prices of perishables

Akram Mohammed

Prices of essential commodities like rice and pulses have not seen much difference in Bengaluru post demonetisation, but prices of perishable commodities like fruits and vegetables are down by 20-30 per cent, according to Bangalore Wholesale Foodgrains and Pulses Merchant Association. Prices of pulses have been more or less stable but volumes are low. There are three issues here. First, sales have come down. Second, perishables are being sold at lower prices since they cannot be stored for a long time. Third, small vendors have been hit really hard.

A vegetable trader Kamraj K said he procures two small truckloads of vegetables every day. However, in the last five days, he has cut it to one. Sales are down by 70 per cent across all foods. Bharath Shah, chairman of the food processing and internal trade cell of the Federation of Karnataka Chambers of Commerce and Industry, said, “I fear this situation will continue for another six months if we don’t bring money back into the market.”


Smaller traders take the hit

Sushmitha Ramakrishnan

The severe shortage in cash has prompted people to tighten their purse strings, bringing less money in the commodity market in Chennai. There is much less supply, as small traders have refrained from buying the usual quantum in a sluggish market. But there is no resultant increase in price due to the lack of demand.
The shops in Chennai that Express visited said their sales have been down by half in the aftermath of the demonetisation drive. But that has not had an impact on prices.
Even in cases like potatoes where the price is supposed to have an upward revision around this time has not happened.
In this currency-driven business, they have no money to procure supplies due to restriction on cash withdrawal. In that, the smaller traders are at a severe disadvantage vis-a-vis the retail chains which have the network to ensure interrupted supply.
Thus, while the smaller ones are seeing a fall of 50 per cent and more in sales, the networked shops have had a beneficial time.

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