WFP Nepal reports says an upward trend with sharp increase for prices of vegetables, fruits and edible oil in Nepal

Kathmandu:  In May 2022, retail prices of most food commodities monitored across 15
major markets showed an upward trend with sharp increase for prices of
vegetables, fruits and edible oil. Prices of cereals and pulses remained
relatively stable.
Overall, the increases observed in the May market monitor can be largely
explained by the impact of the Russia-Ukraine crisis on Nepal’s retail
markets- shortage of some food commodities, increasing fuel prices and
transportation costs, mainly across large consumer and urban markets.
This could be related to the export ban of some food commodities, disruptions
in the global supply chain and price volatility. However, there is no observed
disruption in the local supply across the country.
Nearly 1 out of 3 traders reported insufficient availability of food
commodities. All traders reported to have insufficient edible oils in the
markets followed by wheat and pulses (53.8%) and fuel (38.5%). Moreover,
more than 73 percent of traders reported that edible oil would likely be
scarce in the coming months, followed by fuel (56.1%), wheat (34.1%) and
pulses (29.3%).
Supply and transportation of goods to markets remained stable;
however, increase in transportation costs has been observed in all
surveyed districts. Medium level of supply and transportation of goods to
markets was reported by 88 percent and 93 percent of traders, respectively.
On average, 95 percent of traders observed rise in transportation costs.
Demand for labour in the market was also found to be largely at medium level.
The overall inflation, as measured by the Consumer Price Index (CPI),
increased by 7.87% year-on-year and 1.43% month-on-month in May 2022.
The CPI of food and beverage was 7.13% y-on-y and 1.5% m-on-m. The y-on-y
inflation of non-food and services was 8.45 and 1.35% m-on-m.
Compared to last year, the overall market situation and prices of essential
commodities showed an upward trend with relatively higher fluctuations,
chiefly due to the global markets and supply chain disruptions. This can put
increasing pressure on local markets, as well as food access, particularly for
vulnerable households. Ensuring access to food for these households and
smooth supply and availability of goods in the markets will be critical for price
stability and food security status of vulnerable groups.

On average food stocks in the markets were considered adequate to meet demand
in nearly two thirds of the 23 surveyed districts, while insufficient food stocks were
observed in about one third of the markets at the end of May 2022. Insufficient food
stocks were observed mainly in provinces with relatively large number of consumers and
urban markets. Similarly, certain commodities were found to be scarce – almost all
traders across all surveyed markets reported that edible oil was insufficient, followed by
wheat and pulses (58.3%), and fuel (38.5%). Traders also reported that there would likely
be a shortage of food commodities in coming months. For example, more than 73
percent of traders reported a likely shortage of edible oils followed by wheat (43.9%) and
pulses (29.3%).
More than 61 percent of traders reported that current demand for food and nonfood commodities was at medium level. The current demand for food items was
reported medium by 61 percent of interviewed traders, while nearly 25 percent reported
high demand for food, followed by 14.6 percent with low demand. In terms of demand
for non-food items, about 83 percent of traders reported medium level. At provincial
level, while most provinces consistently showed medium demand for commodities,
majority of traders in Province 1 reported high demand for food. On the other hand, 80
and 60 percent of traders in Lumbini observed low demand for food and no-food
commodities, respectively.
Supply and transportation of goods remained stable in May 2022, however,
increase in cost of transportation was observed across all surveyed district.
Medium level of supply and transportation of goods to markets was reported by 88
percent and 93 percent of traders, respectively. Nevertheless, more than 95 percent of
traders noted that the cost of transportation has increased, ranging from 8 percent in
Sudurpaschim to 41 percent in Lumbini Province. Based on the traders’ observation,
increase in fuel prices is the key factor driving the increased transportation costs. The
data from Nepal Oil Corporation showed an increase of 34 and 29 percent in diesel and
petrol prices from January to May 2022, respectively.

LABOUR MARKET
Labour demand was mostly at medium level during the reporting period. More
than 78 percent of traders considered medium demand for labour in May 2022 as
presented in Figure 4, while nearly 20 percent of traders reported a low demand for
labour. Low demand was more prevalent in Province 1 and Gandaki as reported by 67
and 50 percent respectively. High demand was not observed in any provinces, with an
exception of Karnali where 10 percent of traders noted that demand for labour was
high.
PRICE SITUATION
Retail prices of most food commodities monitored in 23 districts across the
country in May 2022 showed an upward trend with sharp increase for some
commodities. Compared to April 2022, retail prices of tomato, cabbage, orange,
soybean oil, potato, banana and apple increased sharply. For example, the price of
tomato, cabbage, orange, soybean oil and red potato increased by 81.6, 21.4, 20.9, 14.8
and 12.4 percent respectively, while prices of apple, banana, chicken meat and wheat
flour increased by 11.5, 8.9, 7.7 and 3.8 percent, respectively. The retail prices of most
staple food commodities – such as rice coarse, and rice medium (Sona Monsuli), and
pulses, including chickpea and broken lentil, showed a marginal increase.
Compared to the previous three-months, retail prices of most food commodities
showed an upward trend with a sharp increase in prices of fruits such as orange and
banana, and vegetables such as tomato and cabbage. A three-month increase was also
recorded for prices of soyabean oil, chicken meat, wheat flour and broken lentil.
Similarly, year-on-year changes in retail prices showed an upward trend, with relatively
sharp increase in the prices of vegetables, fruits, pulses, wheat flour and edible oils (see
Table 1).
At provincial level, retail prices of most commodities showed relatively higher
fluctuations in Bagmati, Lumbini and Province 1, compared to the other provinces.
Moreover, prices remained relatively higher in Karnali, where prices of most food
commodities are around 15 – 30 percent higher, as shown in Table 2 (next page).
The overall commodity price trend from January to May 2022 shows that the price of
soybean, wheat flour and potato increased sharply (Figure 5). This could be largely
attributed to the combination of the Ukraine-Russia crisis and the export ban of wheat
and other commodities by India. It is anticipated that prices of these commodities
could increase further in the coming months.

METHODOLOGY
WFP Nepal regularly monitors and conducts market survey using the mobile Vulnerability
Assessment and Mapping (mVAM) method. This market survey was conducted in the fourth
week of May 2022 across the country with the aim to monitor the prices of food
commodities and assess the impact of the global market and supply chain disruptions.
In May 2022, 42 traders from 25 districts were interviewed through telephone. The
information assessed includes availability of food and non-food essential items, demand and
supply, transportation and labour demand, including the retail prices of basic food items
and the wage rate of skilled and unskilled labour. The information on prices was reported
directly by the traders, and therefore may not reflect the market price or the actual
transaction value.

Read latest mVAM report for more info:

https://docs.wfp.org/api/documents/WFP-0000140385/download/