Yahoo News 7 Jun 11;
ROME (AFP) – Food prices are to remain high and volatile into 2012, presenting a "threat" to poor countries that will have to spend up to a third more on food imports this year, the UN food agency said on Tuesday.
The Rome-based Food and Agriculture Organisation (FAO) said its food price index averaged 232 points in May -- down from a revised estimate of 235 points in April but was still 37 percent above its level in May 2010.
"High and volatile agricultural commodity prices are likely to prevail for the rest of this year and into 2012," FAO said in a statement.
The reason for the monthly decline was the slight decrease in international prices of cereals and sugar, which offset increases for meat and dairy.
FAO said the next few months will be "critical" -- with encouraging prospects for the wheat harvests in Russia and Ukraine but a potential for lower maize and wheat yields in Europe and North America due to the weather.
"The general situation for agricultural crops and food commodities is tight with world prices at stubbornly high levels, posing a threat to many low-income food deficit countries," said David Hallam, head of FAO's markets division.
FAO said the cost of global food imports is set to reach a record of $1.29 trillion (879 billion euros) in 2011 -- 21 percent more than in 2010.
Low-income food deficit countries and least developed countries will likely have to spend 27 and 30 percent more respectively on food imports, FAO said.
High food prices have benefits
Poorer, agricultural economies stand to gain, says DBS
Jamie Lee Business Times 7 Jun 11;
HIGHER food prices can be more punishing on urban economies such as Singapore and the poor living in these countries, but can lift Asia overall by boosting the larger, poorer and more agricultural economies such as China, DBS Research said in a report.
China, Thailand and India, which have low per capita incomes, collectively exported US$43 billion more food than they imported last year - DBS head of economic research David Carbon estimated - and would take advantage of higher prices.
Meanwhile, food consumption by the top food importers and the richest in Asia on a per capita income basis - Singapore, Hong Kong and South Korea - is around 6-8 per cent of their GDP, much less than their poorest counterparts in India, Indonesia and the Philippines who spend between 20 and 35 per cent of their income on food.
'(This) illustrates what most of us sense intuitively: that poorer people spend more of their income on food than richer people,' said Mr Carbon yesterday. 'The good news is they are Asia's richest three countries and are most able to afford the higher cost of food.'
This, however, means that the poor in these urban countries will be hit hard, with Mr Carbon noting that governments have always tried to 'subsidise rapid urban industrialisation by taxing farmers'.
'Social stability is much more critical in urban areas than in the countryside. You don't get riots in the streets where there are no streets,' he said. 'Keeping food prices low helps the urban poor. And while we are surely right to want social stability and more income equality, keeping food prices low seems just as surely to be the wrong way to achieve these goals.'
Income inequity in poor countries such as China can also narrow with higher food prices, with DBS estimating that a 30 per cent rise in agricultural prices raises per-capita income by 9 per cent on Hainan Island, China's poorest province. Rich cities of Shanghai and Beijing barely flinch in response.
Other economists, however, take a different tack.
'Evidence that the gains to farmers from being a net food exporter outweighs the costs of rising food prices, such that income inequality falls, is not compelling,' said Bank of America Merrill Lynch economist Chua Hak Bin, noting that food price inflation hurts the poor the most, in rich and poor countries alike.
'High food prices will typically a hit a large proportion of households in poorer economies. Gains from higher food prices, if the country is a net food exporter, accrues only to a small segment of farmers.'
CIMB economist Song Seng Wun argued that corporate profit distribution is a crucial point in determining income gap. 'A spike in palm oil prices benefits the owners of these large plantations rather than the Indian workers working at these very large estates.'
Barclays Capital economist Leong Wai Ho sees upside risks to raw food prices in the second half of the year due to erratic weather such as droughts in southern China.
Rise in food prices might help reduce income disparity
Stella Lee Channel NewsAsia 8 Jun 11;
SINGAPORE: Food prices are on the rise, but some economists argue that it may help some Asian countries that are net exporters of food. And they add that this may even reduce to some extent the income disparity between nations.
According to a report issued by the UN Food and Agriculture Organisation, world food prices are likely to remain high into 2012.
Over the past 12 months in Asia, food prices have gone up by 25 per cent in Vietnam, 11 per cent in China and have risen between eight and nine per cent in Thailand, India and South Korea.
One agricultural commodity that has been particularly affected is corn. It has more than doubled in price over the last 12 months.
Ker Chung Yang, an investment analyst with Phillips Futures, said: "The corn demand for food and the corn demand for biofuel production...is sort of trying to fulfil the demand for people."
The US government has attempted to stimulate the use of biofuels with subsidies as an alternative to crude oil. The biofuel subsidies have prompted farmers to shift corn supplies away from the agriculture market.
Other agricultural commodities that have seen significant rallies in price include coffee, wheat and sugar. Over the past year, coffee prices have nearly doubled, and wheat prices have risen 70 per cent.
But on the bright side, economists said global food price increases will reduce income inequality between Asian countries, as poorer nations dependent on agriculture will benefit.
Net food exporters, Thailand, India and China, are set to raise their average incomes. But this will not be the same for the wealthier countries or net food importers, like South Korea, Hong Kong, and Singapore, who will see a reduction in their real income.
David Carbon, Managing Director of Economic and Currency Research at DBS, said: "If you talk about food prices going up and getting a bit more income equality between the rural and urban areas, then that might not be such a bad thing. And again you get this equaliser in income so the distribution tends to become more balanced and more equal."
According to a report by DBS Research, any rise of income inequality within individual Asian countries may hamper the pace of overall inequality reduction in the region. But it adds that with time, overall income inequality in Asia will be reduced as the income disparity in the population heavy countries, such as Thailand and China, is steadily falling.
-CNA/ac
