India’s policymakers and consumers would be cheering a steep slump in commodities, especially palm oil, which could bring about a few months of “surprisingly low” food inflation.
Cooking oils, used to make practically every staple dish in India, have tumbled to their lowest levels in months on rising supplies and as investors cut bullish bets. That is easing concern about runaway inflation and expectations of more aggressive interest rate hikes.
India is the world’s biggest buyer of edible oils and relies on imports for about 60 percent of its needs. Palm oil, which rallied after Russia’s invasion of Ukraine and as Indonesia temporarily banned exports, has plunged 40 percent from a record close in April.
“Lower edible oil prices should start reflecting to some extent in the June reading, with the full impact coming in later,” said Teresa John, an economist at Nirmal Bang Equities Pvt in Mumbai.
Inflation has stayed above the Reserve Bank of India’s 6 percent upper tolerance level since the beginning of this year and forced it to raise rates by 90 basis points in the past two months.
Other inflation-busting measures by Indian Prime Minister Narendra Modi’s government include export curbs on wheat and sugar to safeguard domestic supplies. Officials have also cut taxes on some edible oils and petroleum products, helping to lower food prices that account for about half of India’s consumer price basket.
Sentiment in the commodities market has soured due to fears of recession in major economies. Crude oil has dropped about 20 percent since a peak in March, soybean oil has lost one-third of its value since late April, while wheat and corn have also declined.
With international prices sliding, domestic costs are also starting to fall. The average retail prices of edible oils in India have dropped as much as 8 percent in the past month, government data showed.
“The domestic industry is willing to reduce prices further as global markets have sharply fallen,” said B.V. Mehta, executive director of the Solvent Extractors’ Association of India.
Pump diesel prices also retreated more than 7 percent.
The sharp declines in palm oil, wheat, sugar and rice are good news for inflation, ING Group said.
“In the short term, we may be due a few months of surprisingly low food price inflation, which will help reduce price pressures elsewhere,” the bank said.
However, the fall in prices might not be enough to convince the central bank to scale back its fight against inflation as risks remain.
“We don’t expect them to undertake any action that might dilute the inflation fight,” said Radhika Rao, an economist with DBS Bank in Singapore.
A weaker rupee also needs to be considered as it could undercut the benefit from lower commodity prices, she added.
For now, there are signs that the outlook is improving.
Shashanka Bhide, a member of the central bank’s rate setting panel, said a decline in international agricultural prices and input costs will soften domestic prices as well.
Other commodities:
‧?Gold for August delivery on Friday rose US$2.60 to US$1,742.30 an ounce, down 3.3 percent for the week.
‧?Silver for September delivery rose US$0.05 to US$19.24 an ounce, down 2.2 percent weekly, and September copper fell US$0.05 to US$3.52 a pound, also down 2.2 percent for the week.
Additional reporting by AP
Vincent Wei led fellow Singaporean farmers around an empty Malaysian plot, laying out plans for a greenhouse and rows of leafy vegetables. What he pitched was not just space for crops, but a lifeline for growers struggling to make ends meet in a city-state with high prices and little vacant land. The future agriculture hub is part of a joint special economic zone launched last year by the two neighbors, expected to cost US$123 million and produce 10,000 tonnes of fresh produce annually. It is attracting Singaporean farmers with promises of cheaper land, labor and energy just over the border.
US actor Matthew McConaughey has filed recordings of his image and voice with US patent authorities to protect them from unauthorized usage by artificial intelligence (AI) platforms, a representative said earlier this week. Several video clips and audio recordings were registered by the commercial arm of the Just Keep Livin’ Foundation, a non-profit created by the Oscar-winning actor and his wife, Camila, according to the US Patent and Trademark Office database. Many artists are increasingly concerned about the uncontrolled use of their image via generative AI since the rollout of ChatGPT and other AI-powered tools. Several US states have adopted
KEEPING UP: The acquisition of a cleanroom in Taiwan would enable Micron to increase production in a market where demand continues to outpace supply, a Micron official said Micron Technology Inc has signed a letter of intent to buy a fabrication site in Taiwan from Powerchip Semiconductor Manufacturing Corp (力積電) for US$1.8 billion to expand its production of memory chips. Micron would take control of the P5 site in Miaoli County’s Tongluo Township (銅鑼) and plans to ramp up DRAM production in phases after the transaction closes in the second quarter, the company said in a statement on Saturday. The acquisition includes an existing 12 inch fab cleanroom of 27,871m2 and would further position Micron to address growing global demand for memory solutions, the company said. Micron expects the transaction to
A proposed billionaires’ tax in California has ignited a political uproar in Silicon Valley, with tech titans threatening to leave the state while California Governor Gavin Newsom of the Democratic Party maneuvers to defeat a levy that he fears would lead to an exodus of wealth. A technology mecca, California has more billionaires than any other US state — a few hundred, by some estimates. About half its personal income tax revenue, a financial backbone in the nearly US$350 billion budget, comes from the top 1 percent of earners. A large healthcare union is attempting to place a proposal before
RSS