Global food crisis not yet over :

Millions of Asians to face poverty

The global food crisis is not yet over and international agencies warn over adverse repercussions of food shortage and high food prices on the millions of poor in the world.

The latest report released by the Asian Development Bank last week said that world food prices that surged 30 percent in the first two months of the year threaten to push millions of Asians into extreme poverty and cut economic growth.

"The surging prices translated into domestic food inflation of 10 percent on average in many Asian economies, which could drive 64 million people into poverty.

It will also erode the living standards of families already living in poverty" the Bank said.

Meats are displayed at a wet market in Quezon City, east of Manila on April 26, 2011. Soaring global food prices threaten to push tens of millions of Asians into extreme poverty and cut the region’s economic growth this year, the Asian Development Bank warned in a report. AFP

The report illustrated the reasons for the food price increase.

Food prices have been driven higher by surging oil prices, production shortfalls due to bad weather and export restrictions by several food producing countries.

If high food and oil prices persist for the rest of the year, they could save as much as 1.5 percentage points from economic growth in developing Asian countries, the report said.

According to the report some countries will be hit harder than others.

Singapore is highly vulnerable to inflation because the tiny city-state must import all its food.

On the other hand, South Korea, where food accounts for a relatively small part of the consumer price index, will get off more lightly. The rapid increase in the cost of food is a serious setback for the region that has rebounded rapidly from the global economic crisis. Declining grain stocks, higher demand from Asian countries with big populations that are growing wealthier, and a dwindling amount of agricultural land will continue to keep food prices high in the short term, as will competition for food grains from biofuel production and stagnant or declining crop yields.

Drought in China's major wheat-producing belt and flooding in rice-producing regions of Asia have reduced supplies of those crops.

ADB Chief Economist Changyong Rhee has told that food export bans and other short-term measures should be avoided.

Instead, he urged greater spending to boost agricultural productivity and more investment to improve irrigation, food storage and other infrastructure.

"Left unchecked, the food crisis will badly undermine recent gains in poverty reduction made in Asia," he said.

Poor families in Asia are hit much harder by food price inflation because they spend as much as 60 percent of their income on food, a much higher proportion than in developed countries. Asia's developing countries are home to two-thirds of the world's poor - about 600 million people - who live on $1.25 a day or less. In contrast, people in the U.S. and other wealthy countries spend about 15 percent of their income on food, so the impact on rising food prices on their wallets isn't as big.

And a lot of the food sold in wealthy countries is processed, so manufacturing costs account for a bigger share of the final price.

The ADB is a development lender whose mission is to alleviate poverty through loans, grants and assistance projects.

Global food prices jumped 34.2 percent in February over a year ago following a 28.4 percent rise in January, according to the Food and Agriculture Organisation's (FAO) benchmark index. Surging cereal, edible oil and meat prices were behind the increases.

The FAO warned that 29 countries in Africa, Asia, Middle East and Latin America and the Caribbean would need food assistance.

Afghanistan and Pakistan are among those that will face severe food shortages in part due to factors such as social unrest and ethnic conflicts.

Cambodia and Laos also face unfavourable prospects for crops due to delayed and erratic rains.

Meanwhile, a World Bank report says that since June 2010, an additional 44 million people fell below the $1.25 poverty line as a result of higher food prices.

Simulations show that a further 10 percent increase in the Food Price Index could lead to 10 million people falling into poverty, and a 30 percent increase could increase poverty by 34 million people.

Low-income and lower-middle-income countries are experiencing on average 5 percent points higher food price inflation compared to better-off countries.

A special focus on the Middle East and North Africa region on this issue shows double-digit food price inflation in Iran, Egypt and Syria, with more moderate levels in other parts of the region. Global maize prices are 17 percent higher in the first quarter of 2011 compared to the last quarter of 2010, due to increasing demand for industrial uses and low stocks.

Several countries in Sub-Saharan Africa have faced double-digit increases in maize prices during the first quarter of 2011.

A comparison of price changes within countries shows that price spikes, and therefore poverty impacts, can be highly localised.

Immediate actions include targeting social assistance and nutritional programs to the poorest in areas where food prices have spiked.

Macro-policy measures need to be informed by the extent that commodity price increases are feeding into inflationary expectations; net commodity importers need to monitor external sector vulnerability. Policy actions that will reduce the pressures on tight global food markets include relaxing biofuel mandates when food prices exceed a threshold level and removing export restrictions on grains.

GW