Can a weather pattern over the Pacific Ocean make your morning cup of tea more expensive? It may sound unlikely, but that’s exactly what industry experts are warning about. An intensifying El Niño could
trigger another round of milk price hikes in the coming weeks by disrupting India’s monsoon, reducing fodder availability and squeezing dairy output.
Dairy companies are already preparing for the possibility of another price revision. Parag Milk Foods Chairman Devendra Shah, speaking to The Times of India, said, “Milk prices have already increased by around 2-3 per cent and, if rainfall remains below normal in key milk-producing regions, a further 3-4 per cent increase is possible by July.”
And the impact may not stop at milk. From pulses and vegetables to edible oils, a weaker-than-normal monsoon could push up grocery bills for millions of households.
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Here’s how a climate phenomenon unfolding thousands of kilometres away could end up affecting your monthly food budget.
How Can Weather Affect Food Prices?
The connection isn’t obvious at first, but it follows a simple chain. El Niño leads to a weaker monsoon, which means less fodder and water. This is turn leads to lower milk production and thus, higher milk prices.
Most dairy animals depend on green fodder, crop residue and adequate water. Poor rainfall reduces fodder availability and pushes up feed costs. Farmers are then forced to spend more on maintaining cattle or reduce herd sizes, resulting in lower milk production. When supply falls but demand remains steady, prices typically rise.
Didn’t Milk Prices Just Increase?
Yes. Leading dairy firms like Amul, Mother Dairy, and Parag Milk Foods raised the price of milk by about 2-3 per cent in May. Industry insiders claim that there is a possibility of yet another rise of 3-4 per cent in July or August if the rains are less than usual in areas producing milk.
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This implies that apart from milk, consumers may have to shell out more for other dairy products like curd, paneer, butter, ghee, and cheese.
What Else Could Become More Expensive?
Milk may only be the beginning. Experts warn that a weak monsoon could push up prices of several food items because rainfall directly affects agricultural output.
Speaking to Moneycontrol, Shashi Kant Singh, Partner, Agriculture, Food and Agribusiness at PwC India, warned that “a super El Niño is taking shape in the Pacific, and India’s rural economy is in the crosshairs. This is emerging as a key risk for India’s agriculture”. He added that the impact may not be limited to the kharif season, with warmer winters potentially affecting rabi crops as well.
Some of the biggest risks include:
Pulses: Tur (arhar) and other pulses are considered among the most vulnerable crops during a deficient monsoon. Government officials have warned of significant production risks if rainfall remains weak.
Edible oils: Oilseeds such as soybean could see lower output, increasing India’s dependence on imports and putting upward pressure on cooking oil prices.
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Vegetables: Tomatoes and other vegetables often witness sharp price spikes during poor monsoon years because even small supply disruptions can have an immediate impact on retail prices.
Livestock products: Higher feed costs can also affect the prices of eggs, poultry and other animal-based products over time, though the impact may vary by region.
Shailesh Tyagi, Partner and Leader, Climate Change & Sustainability at Deloitte South Asia, said the immediate concern is for rain-fed crops such as pulses, oilseeds, maize and coarse cereals, warning that weaker rainfall could affect rural incomes, inflation and overall economic sentiment.
Will Rice And Wheat Also Become Expensive?
Not necessarily.
While other crops like pulses and oilseeds are vulnerable to a lack of rain during an El Niño weather pattern due to lack of adequate storage, rice and wheat are less susceptible since India has enough buffer stocks, good water levels in reservoirs, and better irrigation facilities than in past El Niño weather patterns.
However, experts caution that the situation could change if the monsoon performs poorly for an extended period.
Does El Niño Always Lead To Food Inflation?
Not always. El Niño makes it likely that the monsoon will be weak and unreliable, but its effects can depend on various factors, such as the amount of rainfall received by India, its distribution, levels of water stored in reservoirs, irrigation facilities, and government measures through buffer stocks and importations.
Thus, not every occurrence of El Niño brings about a significant increase in inflation. However, it has been observed that in the years when the monsoons are bad, food prices tend to go up.
Should Consumers Be Worried?
For now, experts suggest keeping an eye on the monsoon over July and August, the two most crucial months for India’s agriculture.
If rainfall improves, the pressure on milk and food prices could ease. But if El Niño intensifies and rainfall remains deficient, consumers may have to prepare for higher grocery bills in the second half of the year, with milk likely to be among the first essentials to get costlier.
At the same time, several economists say India is better placed than during previous El Niño episodes because of higher irrigation coverage, stronger foodgrain buffer stocks and better preparedness, which could help limit the impact unless rainfall deteriorates sharply over the next two months.
