Kitchen staples like milk, chicken, oils, wheat and spices become expensive due to Russia-Ukraine war

The demand surge uncorked as covid cases ebbed coupled with supply shortages in domestic production and imports due to the Russia-Ukraine war have increased inflation worries. Consumers will have to brace for unprecedented rise in prices of animal protein including poultry, dairy products, and seafood. Dairy industry leader Amul has increased retail milk prices by 4% starting March 1 in all India markets.

The war has directly affected the prices of sunflower oil, while prices of wheat, coriander, jeera, maize and soyameal due to the indirect effect of drying up of supplies of these commodities from Russia and Ukraine.

Rohit Ahuja, head, research, at ratings agency ICRA said, “At the initial stage, we believe the implications on India would be restricted to rise in commodity prices. However, there are risks from escalation of this conflict to other parts of Europe, and a further surge in commodity prices”

“This price rise is being done due to rising costs of energy, packaging, logistics, and cattle feeding costs. Thus the overall cost of operation and production of milk has increased,” said Amul in a release.

Prices of milk and milk products are heading northwards globally as in India since the past 4 to 5 months. There is global shortage of milk protein as cattle was culled due to covid induced demand destruction, while in India, where culling of cows is not allowed, the production cycle has prolonged.

Dashrath Mane, chairman, Sonai Dairy, the contract manufacturer for the country’s top retail brands and second largest exporter of milk powder after Amul, said “There is huge export demand for milk powder and the returns have almost doubled.”

In a recent research note on dairy sector, Crisil had said “Revenue of India’s organised dairy industry will rebound a solid 12% on-year this fiscal to Rs 1.6 lakh crore, compared with a decadal low growth of ~1% last fiscal, riding on strong demand recovery in most value-added dairy products, steady liquid milk sales, and retail price hikes during the fiscal.”

The Russia-Ukraine conflict has dimmed any hopes of respite from high cooking oil prices for the consumers, who have been paying historically high prices for close to two years.

Chicken prices have jumped 25% since January and industry veterans expect a further increase of 10% to 50% in different parts of the country in March due to acute shortage of feed.

Balram Yadav, managing director, Godrej Agrovet said, “Our chick production has reduced by 20% due to demand disruption caused by the pandemic in contact-based industries. Post Covid, we expect a huge demand surge.”

BV Mehta, executive secretary, the Solvent Extractors’ Association said, “Of the 2.5 million tonne sunflower oil consumed in India, about 90% is imported from Ukraine and Russia. Opening the Rupee Ruble channel can ease these imports. The silver lining is that India has a big stock of uncrushed soyabean and a record harvest of mustard is ahead.”

The prices of sunflower oil in the international market have increased by about 5% to 10% in 8-10 days.

“Due to sanctions on Russia, it is now difficult to open Letter of Credit (LC) to import sunflower oil. We have requested the government to explore the possibility of getting exclusion for sunflower oil from sanctions like the European countries have for oil and gas,” said Sandip Bajoria, CEO, Sunvin Group, a consulting company.

Spices prices are also on the boil due to local shortages and strong global demand. “Coriander prices have increased by about 30% during the past few months as the crop is smaller. Now, we expect increased export demand for Indian coriander as supplies from the black sea region will be restricted,” said Ashwin Nayak, founding chairman, Federation of Indian Spice Stakeholders.

Jeera prices have jumped 25-30% in four months due to reduced production and global demand. India is now the only prominent jeera supplier as supplies from countries like Afghanistan, Turkey and Syria have been disturbed due to geopolitical reasons.

Like coriander, wheat prices in India are likely to move upwards due to the indirect effect of the war. Most of the wheat stock in India is held by government agency Food Corporation of India (FCI), which is not exporting the commodity. However, the demand for Indian wheat in the international market has increased since the outbreak of the war.

“The prices of wheat at the Kandla port have increased from Rs 2200/quintal to Rs 2350-2400/quintal in the last 4 days. With FCI declaring that its upcoming tender this week will be the last one in March, we think that the prices of wheat and wheat products may increase during the next 10-15 days. The next crop will be harvested only after Baisakhi, which falls on April 13,” said Sanjay Puri, past president, The Roller Flour Millers Association of India.