AsianScientist (Apr. 27, 2011) – The food situation in Asia is not looking good, according to a recently released report by the Asian Development Bank (ADB).
Production shortfalls due to bad weather, coupled with a weak US dollar, high oil prices and fear-induced export bans by several key food producing countries are to blame for the surge in food prices since June last year.
Persistent structural factors such as the rising demand for food from wealthier emerging economies, changing diets, competing uses for food grains (e.g. for biofuels), shrinking available agricultural land, and stagnant or declining crop yields, are also exacerbating the shortage.
Just how bad is the situation? Pretty bad.
In the first two months of this year, Asia, home to 3.3 billion people, has witnessed double digit increases in the price of wheat, corn, sugar, edible oils, dairy products and meat. Rice, a staple of many Asian nations, has seen its production take a beating due to the effects of La Nina, prompting consumers to seek cheaper alternatives that are often less nutritious.
The ADB estimates that with the 10 percent hike in domestic food prices seen in Asia this year, an additional 64 million people will be pushed into extreme poverty, based on the $1.25 a day poverty line. Economic growth in the region could also be clipped by up to 1.5 percentage points should this price hike remain for the entire year.
“For poor families in developing Asia, who already spend more than 60 percent of their income on food, higher food prices further reduce their ability to pay for medical care and their children’s education,” said ADB Chief Economist Changyong Rhee. “Left unchecked, the food crisis will badly undermine recent gains in poverty reduction made in Asia.”
The ADB report predicts that this upward price trend is likely to continue in the short term at least.
Governments in Asia are well aware of the potential economic and social impact that a persistent food shortage might have, and many have taken a range of steps to cushion the impact of soaring food prices. These include attempts to stabilize prices through the removal or reduction of import and value added taxes on food, as well as measures to strengthen social safety net programs such as conditional cash transfers.
“Efforts to stabilize food production should take center stage, with greater investments in agricultural infrastructure to increase crop production and expand storage facilities, to better ensure grain produce is not wasted,” says Dr. Rhee.
From 2009 to 2010, the ADB has provided close to $4 billion for food and security-related investment operations. It is also working in collaboration with governments in the region to establish a regional food security strategy, which would include establishing a regional rice reserve to enhance the region’s rice trade, and sharing food security information.
The ADB is an international development finance institution whose mission is to help its developing member countries reduce poverty and improve the quality of life of their people.
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Source: Asian Development Bank.
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