‘Consumer staples may stay costly this festive season’

Consumer staple companies said an erratic monsoon and a weak rupee may keep prices of consumer staples high during the upcoming festive season. All eyes are now on how the monsoon performs in the remaining weeks of the June-September rainy season amid growing concerns over El Nino’s impact.

According to India Meteorological Department figures, 270 districts received deficient rains while 19 districts are largely deficient from June 1 to August 22 this southwest monsoon season. The districts are largely spread over West Bengal, Odisha, Jharkhand, Bihar, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Maharashtra, Telangana and Kerala.

“While we don’t see inflation as a big concern, patchy monsoons could impact some amount of consumer demand in the upcoming festive season, specially in rural markets. Shortfall in rain directly impacts crops, and that dampens consumer sentiment. We are hoping the deficit in rainfall will reverse in the coming weeks,” said Krishnarao Buddha, senior category head, marketing, at Parle Products, India’s largest biscuits maker.

Prices of basmati rice have already climbed by 7-8% in the last month after the government put a ban on the export of non-basmati raw, white rice. “Exports of basmati are witnessing a surge post banning of non-basmati rice resulting in prices moving up. Now if the monsoon is erratic, then it will put further pressure on the overall availability of rice. The lengthy dry spell could impact the domestic soya bean crop, a major source of soybean oil,” said Angshu Mallick, managing director of Adani Wilmar, which sells the Fortune brand of products.
The weakening of the rupee against the dollar has added to the woes of imported consumer staples like edible oils. Mallick said if the rupee weakens further, then the company will have to look into whether to pass on the increased cost on imported edible oil to customers.Atul Garg, managing director of GRM Overseas, said although rice planting gathered pace in the June-July period due to the revival of the monsoon, erratic rainfalls afterwards had impacted the rice cropping and this would have a prolonged impact on the cost of consumer staples. “Given the prevailing scenario, consumer staples prices are likely to remain elevated for a few more weeks,” Garg said.Consumer inflation soared to a one-year high of 7.4% in July, above the Reserve Bank of India’s upper threshold of 6% amid higher food costs. Sraboni Haralalka, executive director of Wodehouse Capital Advisors, said: “Besides the monsoon, RBI’s policy statement also showed that firms expect inflation to trend upwards. In short, the economy is not yet past the point where inflation is no longer a threat to macroeconomic stability.”