The Group of 20 (G20) leading economies will discuss ways to tackle soaring food prices that are stoking fears of a repeat of the 2008 food crisis, as some Asian countries sought to reassure nervous consumers on Friday.
Global food prices hit a record high last month, outstripping the levels that sparked riots in several countries in 2008, and key grains could rise yet further, the United Nations’ food agency said this week.
Policymakers’ major concern is that if unchecked, rising food prices will lead to social and economic instability by stoking inflation, protectionism and unrest.
Importantly, rising food prices could set back the recovery from the financial crisis by cutting into consumers’ budgets in fast-growing emerging economies that are leading the global revival.
Working-group talks in the G20 are underway, aimed at improving global cooperation to resolve food security problems ahead of a summit in Paris later this year, said Rhee Chang-yong, who represents South Korea at the G20.
“France is emphasising food security. As a former host country of G20, we would like to deal with the price volatility problem thoroughly,” Rhee said.
French President Nicolas Sarkozy has asked the World Bank to conduct urgent research on the impact of food prices ahead of G20 meetings later this year, a source familiar with the matter said.
Last year, wheat futures prices rose 47%, buoyed by bad weather including drought in Russia and its Black Sea neighbours. US corn rose more than 50% and US soybeans jumped 34%.
The UN Food and Agriculture Organisation said in a report on Wednesday that sugar and meat prices were at their highest since its records began in 1990. Prices were at their highest since 2008 crisis levels for wheat, rice, corn and other cereals.
During that crisis staple food prices soared and riots broke out in countries from Egypt to Haiti. Import prices jumped, forcing many countries’ trade balances into a deep and costly deficit and several governments in Asia imposed export restrictions on rice.
Still, Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore, said further adverse weather shocks would be needed to drive food commodity prices much above current levels.
“The estimated global and exporting countries’ stock-to-use ratios of both wheat and rice are considerably higher today than in 2007-08, making shortages and drastic export bans unlikely,” he said in a report.
Still, he forecast that food inflation in Asia outside Japan would rise to 15% by the middle of the year from 9,5% in November, adding pressure at the margin for higher interest rates and currencies.
CHILLIS, ONIONS AND RICE
In Indonesia, a fivefold rise in the price of chillis in the past year has underlined for many the rising cost of food that has driven the country’s overall inflation to a 20-month high near 7%.
Farmers are operating around the clock patrols to protect their chilli plants and President Susilo Bambang Yudhoyono has urged households to plant crops in their gardens to help tackle inflation.
On Friday, the country’s Chief Economics Minister Hatta Rajasa sought to reassure Indonesians, saying the government would do what was necessary to maintain food supplies to the country of 240-million people, the world’s fourth-highest population.
“The food pressure is temporary,” he told reporters. “The government will make sure there is sufficient food supply and keep rice stockpiles at 1,5-million t,” he said, adding the local harvest in February would ease food price pressures.
Rajasa said the government has moved to buy 1,3-million t of rice for delivery ahead of the harvest in February.
Thailand, the world’s biggest rice exporter, offered its own reassurance. Commerce Minister Porntiva Nakasai told reporters the country would maintain 2011 rice exports at between 9-million t and 9,5-million t after shipping 9-million t in 2010.
The Philippines, the world’s biggest buyer of the grain, said it would cut its 2011 imports by at least one half, compared with record purchases in 2010, further easing concerns of a tight rice market this year
Still, the head of the National Food Authority, which overseas rice imports, said the group might increase the minimum size of its buffer stock of rice to cover 40 days of demand, up from the current 30 days.
The head, Angelito Banayo, also urged the country to lock in its import needs as earlier as possible.
“We’re quite worried that supply will become tight. That’s why we want to lock in as early as possible our requirements,” he said.
A senior food official in Bangladesh also said the country was worried about food security and had imported 250 000 t of rice from Vietnam to boost stocks.
“We are now at a comfortable position and can start selling rice at a subsidised price in a large scale to help the poor and head off a domestic price hike,” said Ahmed Hossain Khan, the director general of the state grains buyer.
In South Asia, India said it has initiated talks with Pakistan to resume the purchase of its neighbour’s onions, the price of which have in the past triggered protests over food inflation. Onion prices have jumped after weather damaged the Indian crop.
Many countries in Asia, including India and China, have seen food inflation jump to double digit levels. China has imposed price controls to try to ensure stable prices for consumers, and on Friday Ethiopia announced similar measures.
Prime Minister Meles Zenawi said prices of several imported and domestic commodities would be capped. Inflation is over 10% but retail prices of some food items, such as bread, have doubled in the past year.
On Thursday, hundreds of youths clashed with police in several cities in Algeria, including the capital, over food prices and unemployment, residents said.
Source: Engineering News
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