FEED PRICES SKYROCKET: A LEADING INDICATOR
Average prices of poultry feed – consisting of oilseed cakes, rice bran, grounded maize and soya – have risen by 69% y-o-y in July up from 18% in June, because of the lack of rainfall and higher global prices. These price increases outpace those during the 2009 drought.
Feed is a key input in poultry farming, and this sharp price increase suggests that prices of eggs and chicken (protein food items) may rise sharply in the coming months. If farmers choose to substitute poultry feed with cereals then prices for cereals could rise as well.
Rising feed prices are an early indicator of the potential impact that the deficient monsoons could have on food prices. As delayed monsoons hurt production of vegetables, cereal and oilseeds, we expect WPI food (primary and manufactured) inflation, which is currently 9% y-o-y, to rise into double digits in the coming months. This will keep both WPI and CPI inflation elevated above the central bank's comfort zone
Poultry feed an input into poultry farming, is an early indicator of the potential impact a drought could have on food prices.
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