Food prices hit 'dangerous levels'

Today Online 16 Feb 11;

WASHINGTON - World Bank chief Robert Zoellick said yesterday that global food prices have reached "dangerous levels" and warned that their impact could complicate fragile political and social conditions in the Middle East and Central Asia.

World Bank data released yesterday showed higher food prices - mainly for wheat, maize, sugars and edible oils - have pushed 44 million more people in developing countries into extreme poverty since June last year.

"There is no room for complacency," Mr Zoellick told a conference call.

"Global food prices are now at dangerous levels and it is also clear that recent food price rises are causing pain and suffering for poor people around the globe."

Mr Zoellick said although higher food prices were not the main cause leading to recent protests in Egypt and Tunisia, it was an aggravating factor and could become worse.

He warned that a sharp rise in food prices across Central Asia could also have social and political implications for that region.

The World Bank report comes days before a meeting of the Group of 20 major economies in France where higher food prices and the reasons for those upward spikes will be discussed.

Mr Zoellick also said he was concerned that as countries such as Egypt, Tunisia and Jordan address causes of their social upheaval, higher food prices may add to "the fragility that is always there any time you have revolutions and transitions".

The World Bank chief said the international community needed to be aware of such risks and should not exacerbate problems by imposing policies, such as export bans or price fixing, that would push global food prices even higher.

"There is no silver bullet to resolving the potent combination of rising and volatile food prices," Mr Zoellick said, "but food security is now a global security issue."

Catastrophic storms and droughts have hurt the world's leading agriculture-producing countries - including flooding and a massive cyclone in Australia, major winter storms in the United States and fires last year in Russia.

Mr Zoellick said a World Bank team was currently in Tunisia taking a closer look at the country's transition and assessing possible financing needs, including for food assistance.

He suggested that Egypt may not need World Bank funds because its financing situation "is one that should be able to be managed" over the short term. Reuters

World food prices hitting danger levels
44m people pushed into extreme poverty, says World Bank
Straits Times 17 Feb 11;

WASHINGTON: Millions of Asia's poor are being hit both in the pocket and stomach, as global food prices rise relentlessly towards 'dangerous levels', according to the World Bank.

In its report released on Tuesday, the World Bank said higher food prices have pushed another 44 million people in developing countries into extreme poverty since June last year.

Just three years ago, the bank estimated that 125 million people were in extreme poverty - defined as living on less than US$1.25 (S$1.60) a day.

This round of surging food prices is forcing families in India to cut back on meat and vegetables. In Indonesia, it prompted President Susilo Bambang Yudhoyono to urge people to grow their own chillies after the price of the spicy staple rose tenfold. In China, food vendors say they are feeling the squeeze.

Typically, poor families suffer the most because they spend more than half their household income on food.

With inflation climbing across Asia on the back of rising prices, many are reminded of the 2008 global food crisis, which sparked riots in many countries worldwide, including Indonesia.

'There is no room for complacency,' World Bank president Robert Zoellick said on Tuesday.

'Global food prices are rising to dangerous levels and threaten tens of millions of poor people,' he said in remarks made in a statement and conference call.

'If we don't get a relief on the weather side, then I foresee conditions getting worse, and mistaken policy actions such as export bans or other tax or price controls will exacerbate the problems,' he added, referring to the trade curbs and other measures taken in 2008.

The root causes of food price inflation are hotly debated, with explanations varying from country to country.

But one common factor is extreme weather events that are occurring more frequently, wiping out crops.

Floods in Australia, Pakistan and India have forced up food prices, as have droughts in Argentina and Eastern Europe.

In other places, political instability is pushing up food costs.

Chocolate prices rose 12 per cent in January, partly the result of strife in the West African country of Ivory Coast, which placed a one-month ban on cocoa bean exports.

Asia's growing middle classes are also raising demand for food, as people with more income seek out meals with more variety.

Economists say higher energy prices also play a role, not only through higher transport and fertiliser costs, but also by encouraging farmers to use more of their land to grow crops for biofuels.

'Just three years after the terrifying food crisis of 2007-2009, prices of the most important commodity of all are skyrocketing,' economists at global bank Credit Suisse wrote in a report on food price inflation.

Asian inflation is among the most sensitive in the world to food price shocks, it said.

In Indonesia, where inflation was 7 per cent last month, the price of chillies vaulted as much as tenfold in recent months due to heavy rains that wiped out crops.

Some farmers took to arming themselves with machetes to guard their fields, prompting the President to suggest that Indonesians grow chillies in their own backyards.

Families in India, which saw inflation of 8.2 per cent, were hit badly when onion prices shot up after unseasonable rains damaged crops in western Maharashtra state, the main producer. Anger over the high prices erupted into street protests when onion prices nearly tripled to 80 rupees (S$2.25) per kg.

The government responded by quickly importing onions from long-time rival Pakistan. Prices have since stabilised to 20 rupees per kg, helped by an export ban and a fresh harvest.

But overall food prices remained higher than before, forcing families to switch to cheaper substitutes.

'My family switched (from meat) to eating seasonal vegetables, which cost much less,' said Mr Rajesh Kumar, a government clerk married with three children.

In China, inflation was near a 28-month high as food costs jumped more than 10 per cent.

A Beijing food vendor surnamed Zhang said she was earning more money after raising prices but even then found it harder to scrape by because living costs have gone up even more.

Given the urgency of the food situation, the World Bank's Mr Zoellick urged Group of 20 finance ministers and central bankers meeting in Paris later this week to make discussions on food a priority.

'There is no silver bullet to resolving the potent combination of rising and volatile food prices,' he said, 'but food security is now a global security issue.'

ASSOCIATED PRESS, REUTERS, BLOOMBERG