Soft commodity prices back to pre-war levels

24 Jun 2022 , 02:32 PM

After a turbulent first half of 2022 marked by the supply disruptions and inflationary shocks caused by Russia’s attack on Ukraine, soft commodity prices fell back to pre-Ukraine conflict levels.

Crop products like wheat are down 26.4%, corn is down 14.5%, and sugar is down 9.4%. On worries about demand, cotton futures fell to a 3-month low. On concerns about the recession, raw sugar fell to a 6-week low.

Earlier, the Department of Food and Public Distribution made a suggestion that falling worldwide rates and prompt government intervention would lead to a drop in the price of edible oil.

According to government figures, groundnut oil, which is priced between Rs150 and Rs190 per kg, is the only packaged edible oil whose average retail prices have increased since the beginning of this month. According to estimates, this drop in commodity prices will help manufacturing by lowering input costs. It will also help to lower overall inflation.

The international economy has been plagued by multi-decade high inflation, sluggish growth, persistent geopolitical tensions and sanctions, high prices for crude oil and other commodities, and supply chain delays related to COVID-19 ever since the Russia-Ukraine conflict came to an end in March.

Global financial markets have been jolted by unrest amid growing stagflation concerns as the world’s financial conditions have tightened, endangering hopes for growth and financial stability.

The RBI’s tolerance range of 2 to 6% was exceeded in May by retail inflation in India, which was 7.04%.

The RBI projects inflation at 6.7% in 2022—2023, with Q1 at 7.5%, Q2 at 7.4%, Q3 at 6.2%, and Q4 at 5.8%, with risks being fairly distributed, assuming a typical monsoon in 2022 and an average crude oil price (Indian basket) of $105 per barrel.