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Red hot potato market could spell trouble for farmers in India

Potato prices in India started rising in December 2019 due to the delay in harvesting the early rabi crop, according to an article by Samarendu Mohanty, Asia Regional Director of the International Potato Center (CIP).

In a recent news article published on the CIP website, Mr Mohanty writes that although prices fell a bit in February and March with the arrival of the new harvest, they have remained higher than average during the same period in previous years due to less area planted, lower yields and transportation issues.

Farmers in the top two potato-growing states, Uttar Pradesh and West Bengal, planted less area in response to lower prices in 2019, while recent harvest yields were adversely impacted by incessant rains. The COVID-19 national lockdown in late March affected the harvest and transportation of potato to cold storage in many states due to labor shortages and restrictions on movement.

According to the Indian Express in May 2020, 25% less potatoes were placed in cold storages in March and April this year compared to the storage volumes a year earlier.

Samarendu Mohanty says that the supply problem and rush of people to stock up on potato because of its long storability created a spike in prices in late March and early April. Even the non-potato-consuming southern states saw prices increases.

But the price spike was short-lived as demand softened due to the closing of restaurants, fast food outlets and other food service establishments in late May, according to Samarendu Mohanty.

When the economy opened again in late June, prices started rising again as demand from food establishments recovered. Since then, potato prices in some markets have now reached INR 40 per kilogram (USD 0.54), with the average across major Indian markets at INR 33 per kilogram (USD 0.44), which is nearly double the average July price over the past ten years.

As the number of positive COVID-19 cases spikes again with the relaxation of the lockdown, high price fluctuations are expected as the state maneuver to contain the virus and likely to stay high until early rabi harvest December.

However, it is possible that prices could rise even higher depending on the recovery from restaurants, fast food places, and other food service establishments, Mr Mohanty writes.

High potato prices are a double-edge sword for farmers. If prices are higher immediately after harvest, farmers benefit, including those small-scale, marginal and cash-crunched farmers who sell their produce to cover their expenses. If prices increase a few months after the harvest, as in the current situation, then large farmers and traders who have potatoes in cold storage  disproportionately benefit.

Read the full report (including graphs and figures) on the CIP website here.

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