Producer prices set fresh high in March as rupee float bites

• India bans exports of wheat exacerbating food shortage concerns in developing world

The producer prices, an important inflation gauge similar to consumer prices, jumped the most in March, setting a fresh high, as the botched rupee float and the resulting multifold increases in the prices of all commodities and services added to the already hotter prices while the soaring food and other commodities prices are roiling the developing world, including Sri Lanka. 

According to the Producer Price Index (PPI) for March, the prices rose by a record 34.6 percent from the same month in 2021, nearly doubling from the 18.9 percent logged through February—a record then.

Meanwhile, the prices measured on a monthly basis also jumped 15.2 percent in March, from 2.8 percent between January and February, reflecting the price jolt that came from the free float of the rupee on March 7. 
This is also reinforced by the manufacturing sector prices, which rose by 17.8 percent from February levels. The sector is largely exposed to imports. 

The agricultural prices rose by 2.9 percent while electricity, gas, steam and air conditioning and water supply, taken together as a single economic activity, rose by 0.7 percent measured on a 
monthly basis. 

 The producer prices measure inflation at supplier level before reaching the end consumer. 
The consumer prices in the 12 months to March 2022 rose by 18.9 percent before accelerating to 29.8 percent in April. 

Meanwhile, the soaring food prices and other commodities prices are ripping through the developing world, causing shortages and thereby massive scale social unrest, which ended up unseating the government in Sri Lanka last week. 

Exacerbating the global supply chain woes, India on Saturday banned the exports of wheat to help tame its domestic prices. India is the second largest wheat grower in the world, behind China. This came a few weeks after Indonesia halted certain types of palm oil, in an effort to lower the soaring cooking oil prices in the home market. 
Indonesia is the world’s largest palm oil producer. 

These actions by big suppliers in favour of their own people will further stress supply chains, which are already in strain from the pandemic during the last two years, before getting further choked by Russia’s invasion of Ukraine. 
Ukraine supplies 10 percent of global wheat exports, 14 percent of corn exports and nearly half of the world’s sunflower oil. Due to limited supplies from Ukraine, the United Kingdom started rationing sunflower oil since last month. Meanwhile, the disruptions to fertiliser flows from the region to the rest of the world also have begun to affect crop yields. 

On Thursday, the head of the United Nations World Food Programme said the world risks facing an outright food shortage by next year, unless the Ukraine seaports are unblocked by Russia. 

According to the UN Food and Agricultural Organisation, the global food index was up 30 percent in the 12 months to April 2022 and 60 percent since 2019, before the global pandemic hit production and supply chains. 

As the entire world is grappling with commodities shortages, decades high inflation and social and political unrest in differing proportions, it can be said that all of which are by-products of the two-year economic disruption caused by the pandemic to a greater degree.