Impact of Weather Anomalies on Agriculture and Food Prices

The early arrival of the monsoon, expected to be above normal this year, is anticipated to boost the agricultural sector. However, output is influenced by various factors, with changing weather patterns posing long-term challenges.

Research Findings on Weather Anomalies and Food Price Volatility

• A research article in the Reserve Bank of India's latest monthly bulletin highlights the impact of weather anomalies on supply chains and vegetable price spikes in India.
• Analysis of data from April 2014 to March 2024 reveals that food-price volatility, especially for vegetables, is significantly influenced by supply-side conditions, particularly temperature and weather shocks.
• Temperature Anomalies: Immediate impact on vegetable prices compared to rainfall anomalies.
• Example: A one-unit rise in temperature increases the vegetable consumer price index (CPI) by 1.3%, compared to a 1.24% increase from a one-unit rise in rainfall.

Effects of Temperature and Weather Shocks

• Temperature shocks during critical growth stages affect crop yields, particularly for perishable food items like vegetables.
• High temperatures and heatwaves result in water stress, reducing yields, while unseasonal rain and floods damage crops and disrupt supply chains.
• Vegetable inflation is notably volatile, affecting the headline inflation rate immediately.
• Example: The 2023-24 El Nino year saw a drop in vegetable output due to high temperatures and erratic rainfall, leading to inflation in items such as tomatoes, onions, and garlic.

Challenges and Solutions in Horticulture Production

• India, the world's second-largest producer of vegetables and fruits, faces concerns with sudden output drops due to erratic weather patterns.
• Price volatility is asymmetric, with prices rising quickly during shortages but not falling as sharply when conditions normalize, due to fragmented supply chains and inadequate storage.
• To address these issues, India should adopt temperature-resilient crop varieties and improve market linkages through better logistics, storage, and digital platforms.
• International best practices, like Israel and the Netherlands' greenhouse vegetable cultivation, can provide solutions for stable yields and moderated weather effects.

Stabilizing prices is crucial for safeguarding farmer incomes and consumer welfare.