In today's Finshots we see why tomato prices are going through the roof

The Story

Yesterday we talked about the Turkish currency and the runaway inflation that's precipitating an economic crisis in the country. And we attributed most of it to the Turkish president’s counterintuitive economic policies. More specifically his insistence that you could stem inflation by making cheap loans accessible to businesses and people.

This prompted a wave of questions from our readers asking if this cheap loan business is triggering inflation in India. In part, they’re worried about tomatoes.

If you haven’t heard, the prices of tomatoes are going through the roof. Just yesterday, yours truly bought tomatoes from a store in Bangalore at Rs 60/kg. That’s not too bad you think. But some people were buying tomatoes at over Rs 100/kg just a few days back. It’s crazy and obviously, you have to ask at this point — Is tomato inflation a byproduct of the low-interest environment we’re in currently?

No!

This has nothing to do with interest rates. Instead, it has more to do with supply constraints. Here’s the thing about tomatoes. They are grown throughout the year across many parts of the country. However, a bulk of this produce hits the market between the months of November and February and then once again between March and June.

Unfortunately, these tomatoes haven’t been hitting the market as regularly as they once were and this supply crunch in turn is pushing prices higher.

But you know what makes this story weird?

In August tomato prices had hit a staggering low of Rs 4 per kilogram. There was excess supply in all parts of the country. The bumper harvest during the Kharif season had convinced everybody that prices would stay low throughout the year. But it didn’t. Because soon after, heavy rains in Karnataka, Andhra Pradesh and Maharashtra decimated standing crops. These are key suppliers during the October-December period and they’ve been struggling to keep up with demand.

So I am hoping you can see why tomato prices are on the rise. There’s a mismatch in demand and supply. And until a steady supply begins streaming in once again, we are unlikely to see prices moderate.

When will that happen?

Well, some experts suggest that it won’t happen until late December. Even others contend that the next batch of tomatoes will start hitting major markets within the next week or so. What do we think? Well, we are already seeing prices moderate in many parts of the country. So maybe in a couple of weeks, we could see a cool down in prices.

But there’s a bigger problem with tomatoes. It’s a highly perishable product with a shelf life of about 10 days. And since our storage and transport infrastructure is sub-par, the shelf life drops by another day or two. Here’s a report talking about this wastage problem across the tomato supply chain.

Harvesting: Tomato harvesting is done manually in India, which reduces food loss. Labourers can pass through fields 10 to 12 times, picking only the tomatoes that have achieved the ideal level of ripeness. Despite the losses that manual harvesting avoids, handling damages, quality sorting, pests and diseases drive losses of about 10% at this stage.

Post-harvest: The main sources of losses for tomatoes are during transport and handling. Poor road quality, exposure to unfavourable environmental conditions like heat and sunlight, suboptimal packaging quality, long distances and the high number of touchpoints drive losses of about 15–20% at this stage.

Ultimately, about 20% of all tomatoes post-harvest go rotten. Think about that for a moment — Close to a fifth of all tomato produce never gets consumed. On the flip side, if we did manage to contain some of this wastage, prices would never rise this much. In fact, it’s a huge problem for consumers and policymakers.

Indians eat about 40,000 tonnes of tomatoes a day. It doesn’t matter if you’re rich or poor. You’ll be eating tomatoes. And when prices rise, it’ll pinch everybody's pocket. So yeah, hopefully, policymakers can figure out how to contain this wastage problem, because if they don’t, consumers are going to be taking to the streets one of these days. And that won’t bode well for anyone.

Until then…

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