As Asia food prices bite, analysts warn of worse to come
Hong Kong (AFP) Feb 10, 2008
Rising food prices have hit Asia's poor so hard that many have taken to the streets in protest, but experts see few signs of respite from the growing problem.
An array of factors, from rising food demand and high oil prices to global warming, could make high costs for essentials such as rice, wheat and milk a permanent fixture, they say.
"The indications are in general pointing to high prices," Abdolreza Abbassian, a senior grains analyst at the UN Food and Agriculture Organisation in Rome, told AFP.
The agency's figures show food prices globally soared nearly 40 percent in 2007, helping stoke protests in Myanmar, Pakistan, Indonesia and Malaysia.
Yet Asian economic growth is a key reason why prices rose, said Joachim von Braun, from the International Food Policy Research Institute.
"High growth in per capita income, especially in Asia, is driving demand for food," said von Braun, the Washington-based group's director general.
At the same time, Asia's growth has left many of its poor behind, he added. They spend between 50 and 70 percent of their meagre incomes on food, making price rises especially debilitating.
"There was also a lack of investment in agriculture, particularly in science and technology and in irrigation," von Braun said.
Apart from overall higher food demand, changes in taste favouring meat are said to be pushing up prices, since farmed animals feed heavily on grain.
Drought and bad weather, high oil prices stoking transport costs, spiking biofuel demand and low reserves have also played their part, experts say.
"In Australia, we lost almost a year of wheat due to drought," said Katie Dean, an economist at ANZ Bank in Sydney.
Cold weather caused grain crops to fail in Europe and the United States, while bird flu culls and disease outbreaks hit Asian poultry and meat supply, she added, citing as an example pig diseases in China.
-- Climate change seen cutting grain yields --
Elsewhere, Bangladesh is struggling to feed its poor after a 2007 cyclone destroyed 600 million dollars worth of its rice crop.
The price of rice rose around 70 percent in Bangladesh last year. It now stands at around 50 cents per kilo (2.2 pounds), but many Bangladeshis live on less than a dollar per day.
More recently, unexpected snowstorms swept across rice growing areas in China, where rising food costs have already raised the fear of unrest.
Experts are still wary of pinning the blame for these events explicitly on the impact of global warming.
But a Stanford University study found that climate change could cut South Asian millet, maize and rice production by 10 percent or more by 2030.
Climate change, in particular the drive to cut greenhouse gas emissions from conventional fuels to curb global warming, has also driven demand for biofuels.
The high cost of crude oil, which hit record levels in January, has made biofuel production more commercially viable.
Farmers are switching to growing crops such as corn or jatropha, a weed, to feed the biofuel industry rather than crops destined for the dinner table.
"Ambitious government biofuel targets are leading to pressure on prices and probably to some sort of structural increase overall in trend food prices," said Dean.
Thailand, for instance, now requires that all its diesel fuel includes a component made from palm oil, which is also used for cooking. However, the new regulation has sent palm oil prices soaring, contributing to shortages amid shrinking supplies.
The UN food agency's figures show the amount of US maize used for biofuel has doubled since 2003, and predict European wheat use for ethanol could rise 12-fold by 2016.
-- Increasing food grain output a "long-term fix" --
Such trends have led worried Asian governments to address the rise in food prices following popular unrest.
Indonesia has cut tariffs on soybean imports, a staple food it gets mostly from the United States, and wants to curb its reliance on imports.
Malaysia is to establish a national food stockpile. It recently arrested dozens of activists protesting food price rises.
Vietnam said it would suspend rice exports, and India did so last year, said Duncan Macintosh, Manila-based development director for the International Rice Research Institute.
But while economists expect food supplies to rise somewhat in response to higher prices, Macintosh said others doubted it was that easy.
"Myanmar could increase rice production, Indonesia's got a bit of spare land, but there isn't some huge new area that could kick in quickly," he said.
Urbanisation and industrialisation in Asia were eliminating farmland and soaking up scarce water resources, he added.
Meanwhile, government policies were trying to push people out of subsistence agricultural lives into the industrial sector and urban jobs.
"The key is to increase the productivity per hectare right across Asia," he said. "But that is a very long-term fix."
The prospect of high food prices is a sharp break from the past, when the Green Revolution pushed up output but drove down prices in Asia from the late 1960s.
Financial speculators have even begun betting the price of items like wheat and rice will rise, making the picture still more volatile.
"Even if prices fall," cautioned Abbassian, "the chances they will come down substantially are perhaps not there."
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Farming Today - Suppliers and Technology
Paris (AFP) Feb 9, 2008
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