Food inflation may creep higher in coming months, Pg14

Key Highlights:

• The US National Oceanic and Atmospheric Administration (NOAA) declared El Niño conditions on June 11, 2026, forecasting a high probability of a "very strong" event by October-January.
• El Niño is characterized by abnormal warming of central and eastern Pacific Ocean waters, leading to dry weather in India and heavy rains elsewhere.
• Despite the return of El Niño and the West Asia conflict impacting fertilizer prices, global food prices have remained largely stable.
• The UN Food and Agriculture Organization (FAO) Food Price Index in May 2026 showed only a 2.9% increase over May 2025.
• India's consumer food price index inflation, however, edged up to 4.8% in May, suggesting a potential rise in domestic food prices.

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Detailed Insights:

• A "very strong" El Niño occurs when sea surface temperatures are more than 2 degrees Celsius above their 30-year average.
• Current global food price stability is largely due to bumper crops in 2024-25 and 2025-26, which were non-El Niño years.
• The US Department of Agriculture (USDA) estimated record global output for major cereals and oilseeds in 2025-26.
• The West Asia conflict has significantly increased global fertilizer prices due to the closure of the vital Strait of Hormuz.
• Vegetable oil prices have seen a notable surge, partly driven by increased diversion for biofuel production amid higher crude prices.
• A prolonged and intense El Niño could lead to a short and warm winter, potentially impacting India's rabi crops.
• India's wheat stocks, which were critically low in April 2024, have been rebuilt to 42.8 million tonnes by May 1, 2026.
• The future trajectory of food inflation depends significantly on the intensity and duration of El Niño and the restoration of global fertilizer supply chains.

Key Concepts Involved:

• El Niño: A climate pattern describing the unusual warming of surface waters in the eastern tropical Pacific Ocean, affecting global weather.
• Rabi Crops: Agricultural crops sown in winter and harvested in spring, such as wheat, barley, and mustard.
• Strait of Hormuz: A narrow, strategically important waterway connecting the Persian Gulf to the Arabian Sea, crucial for global trade.
• FAO Food Price Index: A measure of the monthly change in international prices of a basket of food commodities.