Asian Nations Feel the Pinch of High Food Prices, but Indonesia Insulated

September 15, 2010

Singapore. Singaporean housewife Nursiah Sabada could only shrug in resignation as she shopped for food ahead of the holiday weekend marking the end of Ramadan.

“It’s the same price being quoted everywhere, and I don’t have much choice because of the festive season,” she said after purchasing three kilograms of beef for the Idul Fitri celebrations.

She was not alone in feeling the pinch, and the rise in beef prices in import-dependent Singapore had little to do with the festival itself.

Millions of Asians like Nursiah are spending more to put food on the table as a result of supply disruptions from floods and drought, while changing patterns of consumption are expected to put long-term pressure on prices.

The UN Food and Agriculture Organization will hold a special one-day meeting to discuss rising world prices in Rome on Sept. 24.

While analysts say the situation is less severe than the one experienced in Asia in 2008, when soaring food costs triggered social unrest in poorer parts of the region, chances of prices easing anytime soon are remote.

“In the immediate future, it’s not going to go up to what we saw in 2008 but the trend is of course on the upside,” said Shikha Jha, principal economist with the Manila-based Asian Development Bank.

Erratic weather patterns, better nutrition amid rising affluence and shrinking supply of arable land are seen as the main factors behind the rising food costs.

“We expect another multi-year food price rise, partly because of burgeoning demand from the world’s rapidly developing and most populated economies, where diets are changing towards a higher calorie intake,” Nomura analysts said.

“The supply side of the food equation is being constrained by diminishing agricultural productivity gains and competing use of available land due to rising trends of urbanization and industrialization,” they said in a report.

The FAO’s food price index in August reached its highest level since September 2008, rising by five percent to an average of 176 points with the spike caused mainly by drought-hit Russia’s restrictions on wheat exports.

Kevin Grice, a London-based economist with Capital Economics, said consumers in Asia’s poorer economies would feel the pain. “I think probably the most vulnerable will be Thailand, India and the Philippines,” Grice said.

Devastating floods in Pakistan have sent prices soaring with inflation set to hit 20 percent, and wiped out 80 percent of farmers’ wheat stock and seeds in breadbasket provinces such as Sindh and Punjab, according to Pakistan’s government.

Major floods have also affected China’s agricultural output, with food prices up an annual 6.8 percent in July after rising 5.5 percent year-on-year in the first six months of 2010, the latest official data show.

In India, food inflation rose 11.47 percent year-on-year in the week to Aug. 28 compared with 10.86 percent in the previous week. Indians saw food prices rise by nearly 18 percent last year after the worst monsoon rains in three decades hit farming output, sparking protests and fiery parliamentary debates.

Food prices in the Philippines, which has a sizeable agricultural sector, are also on the up with sugar particularly affected.

Blaming “irregular weather,” Roberto Amore of the Chamber of Commerce and Industry said: “Areas that need a lot of water for irrigation don’t have water. Areas that need less water have a lot of water, they are inundated.”

In Malaysia, the government has introduced price controls on 18 items including chicken, eggs, some vegetables and fish, but shoppers complain they are not working.

“Consumers are angry. How can you say you control prices when all the basic grocery necessities have gone up?” said Siti Nora Abdul Manaf, a 50-year-old housewife in Kuala Lumpur.

But in Indonesia at least, a stronger rupiah has shielded consumers from sharply higher agricultural prices, economists said.

“If the rupiah weakens, then there could be a problem here,” Sucorinvest Central Gani analyst Gifar Indra Sakti said.

But food prices are relatively stable and the government is “unlikely to introduce any price controls or stockpiling” for now, he said. “There’s no need for Indonesian consumers to panic.”

This entry was posted in agricultures, capital and class, ecological crisis and tagged , . Bookmark the permalink.