World food prices soar as Asia consumes more

World food prices soar as Asia consumes more
By Russell Blinch and Brian Love Reuters
Published: March 31, 2008

WASHINGTON: Food prices are soaring, a wealthier Asia is demanding better food and farmers cannot keep up. In short, the world faces a food crisis and in some places it is already boiling over.

Around the globe, people are protesting and governments are responding with often counterproductive controls on prices and exports - a new politics of scarcity in which ensuring food supplies is becoming a major challenge for the 21st century.

Damaged by severe weather in producing countries and plundered by a boom in demand from fast-developing nations, global wheat stocks are at 30-year lows. Grain prices have been on the rise for five years, ending decades of inexpensive food.

Drought, a declining dollar, a shift of investment money into commodities and use of farm land to grow biofuel crops have all contributed to food woes. But population growth and the growing wealth of China and other emerging countries are likely to be more enduring factors.

World population is set to hit 9 billion by 2050, and most of the extra 2.5 billion people will live in the developing world. It is in these countries that the population is demanding dairy and meat, which require more land to produce.
This is an additional setback for the world economy, at a time when we are already going through major turbulence, but the biggest drama is the impact of higher food prices on the poor," Angel Gurría, head of the Organization for Economic Cooperation and Development, said.

In Gurría's native Mexico, tens of thousands took to the streets last year over the cost of tortillas, a national staple whose price rocketed in tandem with the price of corn.

Global food prices, based on United Nations records, rose 35 percent in the year to the end of January, markedly accelerating an upturn that began, gently at first, in 2002. Since then, prices have risen 65 percent.

In 2007 alone, according to the UN Food and Agriculture Organization's world food index, dairy prices rose nearly 80 percent and grain 42 percent.

"The recent rise in global food commodity prices is more than just a short-term blip," the British research group Chatham House said in January.

"Society will have to decide the value to be placed on food," it added, and how "market forces can be reconciled with domestic policy objectives."

Many countries are already facing these choices.

After long opposition, Mexico's government is considering lifting a ban on genetically modified crops to allow its farmers to compete with the United States, where high-yield, genetically modified corn is the norm.

The European Union and parts of Africa have similar bans that could also be reconsidered.

A number of governments, including Egypt, Argentina, Kazakhstan and China, have imposed restrictions to limit grain exports and keep more of their food at home.

This knee-jerk response to food emergencies can result in farmers producing less food, and it threatens to undermine years of effort to open up international trade.

"If one country after the other adopts a 'starve-your-neighbor' policy, then eventually you trade smaller shares of total world production of agricultural products, and that in turn makes the prices more volatile," said Joachim von Braun, director general of the International Food Policy Research Institute in Washington.

In Argentina, a government tax on grain led to a strike by farmers that disrupted grain exports.

Vietnam and India, both major rice exporters, announced further curbs on overseas sales Friday, sending rice higher on U.S. futures markets.

Other food commodities retreated from record highs in recent days, but analysts attributed that less to fundamentals and more to profit-taking by investors.

In the next decade, the price of corn could rise 27 percent, oilseeds like soybeans by 23 percent and rice by 9 percent, according to tentative UN and OECD forecasts in February.

Waves of discontent are already starting to be felt. Violent protests hit Cameroon and Burkina Faso in February. Protesters rallied in Indonesia recently and media reported deaths by starvation. In the Philippines, fast-food chains were urged to cut rice portions to counter a surge in prices.

Trade Minister Kamal Nath of India said Monday that the government was looking to cut duties on food items to rein in rising prices.

"We are looking to cutting our duties on many products on the food front," he said, ahead of a cabinet committee meeting to consider ways to contain prices. Earlier this month, the government cut the import duty on crude palm oil to 20 percent from 45 percent, and on refined palm oil to 27.5 percent from 52.5 percent.


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