Will food inflation be easier than expected?
It is possible with international prices falling the most since October 2008 and a good monsoon at home.
Elon Musk says the global economy has passed the peak of inflation. The founder and CEO of Tesla believe “inflation is going to drop rapidly,” and prices of commodities going into electric vehicles are “trending down.”
He is projecting what is already happening in the food industry. In July, the UN Food and Agriculture Organization’s Food Price Index (FPI) averaged 140.9 points, down 8.6% from the previous month and the steepest monthly decline since October 2008.
A trade-weighted average of key food commodities over a base period value of 100 for 2014-16, the FPI reached 159.7 points in March, the month following the Russian invasion of Ukraine. In January, before the ongoing war, the index reached 135.6 points, the lowest since then.
The FPI has declined cumulatively by 11.8% between March and July. The average price of vegetable oils and cereals has fallen even more, by 32% and 13.4%, respectively. Vegetable oil prices have been particularly volatile, soaring from 77.8 points in May 2020 to 251.8 points in March 2022 and easing to 171.1 points in July 2022 (see chart).
The great global food inflation began around October 2020 as a result of four major supply-side shocks: weather, pandemics, wars, and export controls.
Among the weather-related shocks were droughts in Ukraine (2020-21) and South America (2021-22), which impacted sunflower and soybean supplies, as well as a heatwave in March-April 2022 that destroyed India’s wheat crop.
Malaysia’s oil palm plantations felt the pandemic’s supply-side impact the most, where migrant laborers from Indonesia and Bangladesh harvest fresh fruit bunches. Due to Covid-19, many of them had to return home, and no new work permits were issued, so production from the world’s second-largest palm oil producer and exporter dropped.
In 2019-20 (a non-war, non-drought year), 28.5% of the world’s wheat, 18.8% of corn, 78.1% of sunflower oil, and 34.4% of barley exports were interrupted by the Russo-Ukrainian War.
In December 2020, Russia imposed export controls as a result of fears of domestic food inflation caused by record-high temperatures. From March-May 2022, Indonesia (the world’s No. 1 producer-importer of palm oil) and India (the world’s No. 1 wheat importer) took similar measures due to shortage concerns at home.
The perfect storm caused by all four shocks coming one after another within one and a half years seems to be receding. The resumption of exports from Ukraine through the Black Sea is its most obvious symbol. As a result of Russia’s so-called special military operation, this critical artery of global agricultural trade was blocked. As part of the UN-backed agreement to unblock the Black Sea trade route, Russian food and fertilizer shipments will be unhindered. In 2022-23 (July-June), Russia will export 40 million tonnes (mt), up from 33 million tonnes last year.
However, Ukraine and Russia are not the only ones affected. Since late May, Indonesia has lifted its ban on palm oil exports. Soybeans are being harvested in bumper crops in the US, Brazil, Argentina, and Paraguay at the same time. The price sentiment has changed for a reason. India imports roughly 60% of its edible oil requirements annually, which is most noticeable in edible oils. There has been a decrease in the all-India modal (most-quoted) retail price for soyabean oil from Rs 175 to Rs 150 per kg and for palm oil from Rs 165 to Rs 142.5 per kg in the last three months.
Inflationary pressures in the domestic market are expected to ease significantly, despite global trends.
There are several monsoons, but the southwest monsoon is the most significant. During the current season, from June to August 7, cumulative rainfall exceeded the historical long-term average by 5.7%. Except for Uttar Pradesh, Bihar, Jharkhand, and West Bengal, almost all agriculturally-significant areas have received good rain. Another low-pressure area is forecast to form after mid-August over the northwest Bay of Bengal off the Odisha-West Bengal coasts.
In the South Peninsula, Central, and Northwest India, above-average rainfall this Kharif (monsoon) season has boosted acreages under most crops. As shown in the table, rice (transplanting has been adversely affected by deficient rains in the Gangetic Plain states), pulses, and groundnuts (their area has been diverted to cotton and soybean, which have higher prices) are exceptions.
As of July 1, rice stocks in government godowns were 47.2 mt, 3.5 times the necessary “buffer” of 13.5 mt. As a result of that, and the fact that paddy is also grown in the rabi (winter-spring) season, the overall rice situation should be manageable.
In the same way, pulses are also readily available. In wholesale mandis, chana (chickpea) is selling at Rs 4,400-4,600 per quintal, below its minimum support price of Rs 5,320. As compared to 2.2 mt and 25,000 tonnes respectively a year ago, government agencies are holding about 3 mt of chana and 100,000 tonnes of Masur (red lentils). Both pulses are also experiencing higher international exportable surpluses than last year, mainly from Canada and Australia. Myanmar’s July-end urad (black gram) stocks are estimated at 0.3 mt, approximately 0.1 mt higher than a year ago.
The lack of acreage, low government stocks (0.1 mt versus 0.4 mt last year), and no additional exportable supplies (from Mozambique, Tanzania, Malawi, and Myanmar) could cause problems in arhar (pigeon-pea). An industry source said that the Narendra Modi government’s decision to allow duty-free imports of arhar, urad, and Masur until March 31 should keep overall prices in check.
Globally and domestically, there are compelling reasons for food inflation in India to “trend down” even if it does not “drop rapidly.” Edible oils are already showing this trend. Soybean and cotton production should increase as a result of the monsoon, making oil cakes more readily available. Animal and poultry feed contains these ingredients, along with maize. Furthermore, a good monsoon would mean more fodder and water for animals, reducing livestock input costs and inflationary pressures on milk, eggs, and meat.
There is 5.9% more water in the country’s major reservoirs than a year ago and 25.1% more than the average storage of the last ten years. If the monsoon delivers reasonably in the second half (August-September), groundwater recharge would also benefit the rabi crop. Assuming no further setbacks in the Black Sea, the Reserve Bank of India’s monetary policy committee may not need to raise interest rates further.
Athletes have gone missing from International events.
A number of international sporting events have reported cases of players disappearing, extending their stays, or even defecting to another country.
Three Sri Lankan athletes have gone missing during the 22nd Commonwealth Games, which are set to end on August 8. Despite police speaking to two of those players, a Sri Lankan wrestler is still missing from the Birmingham Games.
This is not a new occurrence in Sri Lanka. During years of domestic turmoil and civil war, many athletes have disappeared during international tournaments. A 23-member “handball team” disappeared in 2004 while visiting Germany for ‘friendly games’, with Sri Lankan sports officials claiming they were unaware of the team’s existence.
The Commonwealth Games are just one international platform where athletes from hundreds of countries compete and, more importantly, travel far from home. Players from countries experiencing a political crisis or an unstable economic situation usually go missing or run away from the games.
Some athletes leave their passports and important documents with their coaches and team managers and venture out into their host country in search of better living conditions. Countries like the UK allow participants and officials to obtain visas for a few months after the games.
The authoritative regimes at home, which do not allow players to question the sports facilities available to them, have at times granted asylum or protection from deportation to athletes such as sprinter Lamin Tucker from Cameroon after he defected to Australia after the 2006 Commonwealth Games.
Overstaying has been caused by less grave reasons in some cases. According to the Guardian, the British Olympic Association spokesman said: “You can’t really blame people who have overstayed; it’s an awful lot warmer in Australia now.” Eight British citizens overstayed their visas in Australia for sightseeing after the 2000 Olympics.
According to a BBC report from the time, at least 13 African athletes disappeared during the 2018 Commonwealth Games in Australia. The majority of the team members were from Cameroon, and the disappearance was described as a ‘desertion’ by the team.
Uganda, Sierra Leone, and Rwanda were also missing athletes. There are times when even the appointed coaches and other staff members run away, as happened at the 2006 Commonwealth Games, which was held in Melbourne, where more than 40 athletes and officials went missing, overstayed, or sought asylum in a country with notoriously harsh immigration laws.
In the Olympics, such disappearances are so common that these athletes are often referred to as “Olympic defectors.” During the Cold War, many people from Communist countries sought ‘refuge’ in Western countries during the modern history of the games.
The Guardian reported in 2002 that such manoeuvres were often seen as politically useful defections during the Cold War. Nowadays, rich countries are less hospitable to immigrants as they are to immigrants in general.”
The 1956 Olympics in Melbourne were held during a time when the USSR used force to suppress an uprising in Hungary. According to The Washington Post, the Hungarian Olympic team heard the news after landing in Melbourne and planned not to return. A water polo semifinal between Hungary and the Soviet Union turned nasty, and players emerged from the pool with bloody mouths and foreheads. After the games, many players defected to the United States.
Several factors contributed to the decision of a Sierra Leonean sportsperson to stay in the UK, according to the same Guardian report. “Athletes had been preparing for the Commonwealth Games in difficult conditions for years – the weightlifters trained by lifting concrete-covered car tyres,” and they had no money after competing, having to buy raincoats from a cheap UK store for the opening ceremony,” the athlete said.
In the end, some athletes settle permanently, working jobs and sending money home, while others return after some time due to homesickness, family, or a lack of opportunities for foreigners without proper documentation.
It is complex to decide whether to stay or leave after an escape has been made. Defectors’ home countries have said in the past that these episodes weaken their standing, and they are no longer seen as serious about sports and following the international system.
As a possible justification, others point to desperate survival conditions in home countries. It’s the harsh conditions and lack of basic human rights that have compelled me to seek asylum”, said Weynay Ghebresilasie, an 18-year-old athlete from Eritrea seeking asylum in the UK, who now represents.
Asylum applications are governed by various laws and criteria, and economic hardship is rarely an acceptable reason for granting asylum. The policies of different countries on granting asylum vary, leaving such athletes without a clear path forward.
Why are presidential elections important in Kenya?
Raila Odinga, opposition leader in his fifth presidential run, is supported by his former rival Kenyatta. Another is William Ruto, Kenyatta’s deputy, who fell out with him.
Kenyans will vote Tuesday for a successor to President Uhuru Kenyatta after a decade in office. For the first time, a runoff could be required in this race.
It is unclear how either will follow up on Kenyatta’s diplomatic efforts to quell tensions in Ethiopia or disputes between Rwanda and Congo.
About 56 million people live in Kenya, East Africa’s economic hub. Recent elections in the country have been turbulent.
There is no transparency in campaign donations or spending in Kenya. Many candidates for Parliament and other posts spend hundreds of thousands of dollars to gain access to power and its benefits.
In contrast to Kenyatta and Odinga, Ruto portrays himself to the young and poor as a hustler who rose from humble beginnings as a chicken seller. In addition to improving agricultural productivity, he seeks to expand financial inclusion.
About 70% of Kenya’s rural workforce works in agriculture, which is the main driver of the economy. If elected, he promised to increase job opportunities by 200 billion shillings ($1.6 billion) a year.
He has promised cash handouts to the poorest Kenyans and more accessible health care for all. Odinga was jailed decades ago for fighting for multi-party democracy. On Saturday, he promised that if elected, his government would begin paying 6,000 shillings ($50) to families living below the poverty line in its first 100 days.
Kenyans, especially younger ones in a country where the median age is about 20, are apathetic towards Odinga and Ruto. Just 2.5 million new voters were registered by the electoral commission, less than half what it had hoped for.
In every election, widespread corruption and the economy are key issues. Following Russia’s invasion of Ukraine, Kenyans have suffered rising food and fuel prices, and that follows the financial pain of the COVID-19 pandemic. Youth unemployment in the country exceeds a third.
Within a week of the vote, the official results will be announced. A candidate must win at least 25% of the votes in more than half of Kenya’s 47 counties to win outright. There will be a runoff election within 30 days if there is no outright winner.
During the previous presidential election in 2017, a top court overturned the results and ordered a new vote, a first in Africa.
A new election will be held within 60 days of the court’s ruling if the court calls for a new vote. After the results are declared, candidates or others have a week to file a petition to the court, which has two weeks to rule on it.
During his campaign speech on Saturday, Odinga told the crowd that the country was at an inflection point. No matter what happens, he will shake the hand of his “rivals” regardless of whether he wins or loses.
According to Ruto, he will “respect the decision of the people of Kenya” and will not accept violence.
edited and proofread by nikita sharma
