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India is the emerging market most vulnerable to rising food prices according to a Barclays Capital note quoted by Agrimoney.The country’s food inflation could rise to double digits again in coming months. This is worrisome since agriculture still accounts for about 15 per cent of its GDP. Indians spend a large portion of their income on food, which accounts for 36 per cent of the consumption basket.
The rise in international food prices is only going to make the situation worse.
A severe drought in the Midwest has sent corn, wheat and soybean prices surging.
A report issued by the UN’s Food and Agriculture organisation (FAO) today said that export prices of corn (maize) increased 20 per cent in the first three weeks of July, compared to June.
“Prices were underpinned by continuous concerns about the impact of hot and dry weather conditions on yield potential of the 2012 maize crop in parts of the United States.”
International prices of where climbed 21 per cent in the same period. “Deterioration of prospects for the 2012 wheat production in the Black Sea region due to dry and hot weather, particularly in the Russian Federation, and strong maize values have put upward pressure on wheat prices since the second half of June. Estimates pointing to reduced plantings of the 2012 spring wheat crop in the United States contributed to the increase.”
India struggled with double digit food inflation in 2011 and a report published last year said Indian consumers had lost 128.7 billion to inflation in the past three years. As the country continues to struggle with growth, the country’s central bank is going to have a harder time cooling inflation as growth also continues to slow.
Indian scientists are trying to build computer models that would help them predict movements of the monsoon. But with the monsoon’s about 22 per cent behind average this season, for now all they can do is pray for rain.