The prices of cereals are unlikely to surge as in the recent past but may remain elevated well into next fiscal due to a troika of factors — vagaries of climate change, strong global demand, and rise in domestic demand.
 
To be sure, production of cereals, which form an essential part of the staple diet in different parts of India, has grown consistently in the past 50 years, logging a compound annual growth rate (CAGR) of 2-3%. In recent years, increase in awareness among farmers on good agriculture practices, support from government in the form of input subsidies and procurement at minimum support prices (22-23% CAGR FY17-22), positive export sentiments (22-23% CAGR FY17-22), and growth in domestic demand have all contributed to growth in production.
 
However, prices of cereals have risen faster. The weighted average crop price index for cereal crops logged 3-4% CAGR over fiscals 2017-2022. Even this fiscal, prices of cereals have risen significantly on-year in the first nine months — of wheat and paddy by 8-11%, and of maize, jowar and bajra by 27-31%.
 
Says Pushan Sharma, Director, Research CRISIL Market Intelligence & Analytics, “The reasons are for all to see. Recent years have seen a spurt in climate-change events, like heat waves and erratic monsoon which has resulted in lower production of wheat and paddy, respectively, this fiscal. Add to this demand from global and domestic markets and the stocks of wheat and rice are estimated to be lower by 12% and 35%, respectively, for fiscal 2023, leading to a surge in prices of these commodities.”