Tomato-nomics — Behind the kitchen staple’s soaring prices
Would the late American novelist and food columnist Laurie Colwin revise her comment “a world without tomatoes is like a string quartet without a violin” in today’s Indian situation if she were alive?
Tomatoes are currently in the spotlight in the media as prices reign supreme at an average of €97.98 per kg, according to Consumer Affairs Department. The price of a basic kitchen is 170 rupees in Nagpur, Maharashtra, and in Ramgarh, Uttarakhand, the price is $18 – the lowest in the country.
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A decline in tomato production of about 20 percent in Tamil Nadu, Gujarat and Chhattisgarh has worsened tomato supplies in the 2022-23 (July-June) crop season, says Bank of Baroda (BoB) economist Depanweta Mazumdar.
Third consecutive decline
This is the third consecutive decline after production peaked at 21.187 million tonnes (metric tons) in 2019-20. In 2020-21, it dropped to 21.181 tons before slipping to 20.69 tons in 2021-22 and 20.62 tons in 2022-23. This means that tomato production has fallen by more than 2.5 percent in the past three years!
“Government data reveals that Madhya Pradesh, Karnataka, Andhra Pradesh, Gujarat and Odisha contribute 51.5 percent to total tomato production,” she said.
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In Tamil Nadu, production decreased by 26.1 percent and in Gujarat by 23.9 percent. Mazumdar said the decrease in Chhattisgarh was estimated at 19.7 percent.
Although Karnataka recorded a rise of 23.1 per cent in tomato production, the increase follows a rise of 1.3 per cent following a decline of 24.2 per cent in 2020-21. Similarly, Odisha production increased by 25.1 per cent but after a 20 per cent drop in the previous year. Same with Bihar, where output increased by 11..2 per cent but after decreasing by 13.3 per cent in the previous year.
weather effect
During the just-ended spring season, the crop may have been affected by the irregular rainfall, which was witnessed in March, or the heat wave, which was seen in late April-early May.
“But as the crop arrives from July to November, some thinning of the path may be noticed,” Mazumdar said.
“An unexpected price shock led to a spike in vegetable inflation,” she said, analyzing the impact of higher tomato prices.
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Moreover, the tomato price spiral can be seen in months like June, September and November. Hence, there is a seasonal trend associated with the harvest and arrival of vegetables. Price increase cycles are short-term, generally not exceeding 4-5 months. Hence, what is comforting in this case is that the current recovery may witness a reversal soon,” said the economist at Bank of Baroda.
Wholesale and retail margin
She referred to the data of the Consumer Affairs Department at the rate Retail price of tomatoes In June it was $32.60/kg, while the wholesale price was $24.90. The gap between the two prices in June was $7.70 – higher than the gap seen over the longer term at $7.20.
A feature noted by Mazumdar is that since prices started to rise from mid-June, wholesale and retail margins have widened, reaching $12.5/kg on June 30.
Also read: Report: Rising prices of tomatoes and pulses push up average cost of Indian thali in June
“It’s quite clear, the margins charged at the retail end have been increasing consistently,” she said.
One economist described the widening gap between wholesale and retail prices of tomatoes as a “volatility premium” in light of projected shortages of the vegetable.
But Mazumdar holds out hopes for consumers, saying, “With the harvest arriving in July and November, a correction in prices could be seen in the second half of 2023.”