Global food inflation is on the rise …

Global wheat, rice, maize and soybean prices have increased to new multiyear highs. The CRB food stuff index has rise 23.7% y-o-y in December 2007. The FAO’s food price index rose by 40% in 2007, on the top of the already 9% increase the year before, and the poorest countries spent 25% more in 2007 on imported food.

The prices of grain-fed meat, eggs and dairy products are also significantly up spurring wide spread inflation throughout the consumer food market.

In India, healthy buffer stock and the government’s efforts to restrict exports have helped in keeping domestic food prices (especially of grains and pulses) insulated so far (In fact, NCDEX agri index is currently quoting marginally down y-o-y). However, with a lag, some amount of pass-through of higher international prices in domestic food prices will be inevitable. In India, domestic demand supply situation is also very tight in certain agro commodities like wheat and edible oil, any adverse impact on output could potentially push up the domestic food inflation sharply (as on January 2008, area under acreage for wheat is down 2-3% y-o-y and for oil seed, it is down ~ 10% y-o-y).

Rising inflation and slow response to rising demand for wheat, pulses, rice and edible oil have caused a sense of urgency for food security in the country…. The rates of growth of agriculture in the last decade have been poor and are a major cause of rural distress… Farming is increasingly becoming an unviable proposition because of the nature of landholdings.”

Honorable Prime minister Dr. Manmohan Singh speaking at 53rd meeting on the National Development Council