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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2762

Escalating Food Prices: Moral Dilemma Confronting the World

Sunday Discourse by Philip Fernando in Seattle

There are few signs that the world will ever come to grips with the problem of escalating food prices. While we are witnessing the rise of mega-entrepreneurs in Asia, the threat of soaring food prices dwarfing such a scenario is real. The average middle class family in Asia, Middle East and Latin America ekes out a hand-to-mouth existence today.

The cost of living is the most prevalent phenomenon in many parts of the world. Reports indicate that the rising food prices have hit Asia’s poor so hard that many have taken to the streets in protest. No near term respite from the growing problem is evident.

No analysis is needed as to why the prices are so high. As demand for food went up accompanied by sky-rocketing oil prices which had the ripple effect of sending transportation costs to dizzy heights and this has brought about this situation. An array of factors, from rising food demand and high oil prices to global warming, could make high costs for essentials such as rice, wheat and milk a permanent fixture. Worse still. There is no quick fix in sight.

UN Food and Agriculture Organization in Rome had repeatedly warned of dire consequences as prices soared during the past two years. The agency’s figures show food prices soared nearly 40 per cent in 2007, helping to stoke protests in Myanmar, Pakistan, Indonesia and Malaysia. In Sri Lanka cost of living is the most discussed item during the last budget debates.

Yet Asian economic growth is a key reason why prices rose, said Joachim von Braun, from the International Food Policy Research Institute. “High growth in per capita income, especially in Asia, is driving demand for food,” said von Braun, the Washington-based group’s director-general.

At the same time, Asia’s growth has left many of its poor behind, he added.

They spend between 50 and 70 per cent of their meager incomes on food, making price rises, especially debilitating. There was also a lack of investment in agriculture, particularly in science and technology and in irrigation,” von Braun said.

A number of factors have combined to bring about the drastic spiraling effect in food prices. Apart from overall higher food demand, drought and bad weather, high oil prices and its impact on transport costs and the diversion of agricultural, activity towards meeting the bio-fuel demand are the primary causes for the current state of affairs.

Australia had droughts causing poor wheat harvests. Cold weather caused grain crops to fail in Europe and the United States, while bird flu culls and disease outbreaks hit Asian poultry and meat supply. China reported cases of pig diseases. Bangladesh is struggling to feed its poor after a 2007 cyclone destroyed 600 million dollars worth of its rice crop. Sharp rise in rice price was felt in Sri Lankans early this year. Malaysia is to establish a national food stockpile. It recently arrested dozens of activists protesting food price rises. Vietnam said it would suspend rice exports, and India did so last year, say Duncan Macintosh, Manila-based development director for the International Rice Research Institute.

Commodity prices are the surest indicator of what is going on.

According to most reports, the price of wheat has doubled in the past 8 weeks. We are looking at an easy 25% to 50% increase in food prices by mid-summer, barring some unforeseen correction. Besides the changes in supply and demand, the inflation factor also brought in its share of woes.

The rapid and almost insane speed with which prices rose caused greatest havoc for the poorest.

Reports indicate that earlier in 2008, U.S. Agency for International Development had been forced to skim off funds from future food-aid programs, worth about $120 million.

It was also reported that millions who were previously earning enough to feed their families were not able to do so now and were now swelling the ranks of those expecting relief from aid organizations. Hunger is raising its ugly head. According to the executive director of U.N.'s World Food Program, Josette Sheeran, People who were not in the category urgently in need were moving into that category." The organization currently feeds about 73 million people, including millions who get by on just 50 cents a day.

The general prediction is that food prices will remain high for years to come according WFP has concluded that food prices will remain high for years. It might cut its relief programs unless it raises an extra $500 million this year. "There is no way we can absorb a 25% price rise in one day and the volatility of the markets," Sheeran said.

The high oil prices also increase the price of many other commodities such as fertilizer and services like shipping and cargo rates.

Grain now used in the production of bio-fuel was the final nail in the coffin. For example, heavy U.S. subsidies for ethanol have gobbled up needed food acreage, as farmers switch from producing food. "The area used for bio-fuels is increasing each year," says Nik Bienkowski, head of research at ETF Securities, a commodities trading firm in London.

One rosy side to all this is that farmers are now able to get a good price for their products. U.S. and British farmers are laughing all the way to the bank," says Simon Maxwell, director of the London-based Overseas Development Institute, an independent think tank. "And some poor people will get
jobs on farms or in local communities."

But consumers who must buy their food, faced with prices rising faster than wages and relief agencies not in a position to feed the hungry to the extent they have to, the prospects are dim.

- Asian Tribune -

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