Asia's organic food industry coming of age

Asia acts against rising food costs

Beijing and Seoul - China has dumped plans to import several million tons of expensive maize this year and South Korea has cut import tariffs on some products, underscoring the dilemma over how to tackle rising food prices.

In India, where vegetable prices have risen more than 70 percent in the past year, the finance minister was due to unveil measures later yesterday to combat inflation.

However, a rally in grain prices after a US report on Wednesday warned of dwindling global supplies suggests that further price pressures may be in the pipeline.

However, a rally in grain prices after a US report on Wednesday warned of dwindling global supplies suggests that further price pressures may be in the pipeline.

World food prices hit a record high in December after adverse weather affected crops, the UN’s food agency said in a report last week that raised concerns about inflation, protectionism and social unrest – factors that contributed to the 2008 global food crisis.

While most analysts doubt that the world is heading for a crisis similar to 2008, when food prices spiked to fire up inflation and trade deficits blew out, a rise in oil prices is also looking menacing.

London Brent crude at close to $100 (R684) a barrel is trading at its highest price since 2008, when oil hit record highs and contributed to inflation spike.

Wheat prices rose 47 percent last year, maize more than 50 percent and US soya beans by 34 percent. The UN Food and Agricultural Organisation said in its report that prices of key grains could rise further.

Wednesday’s US Department of Agriculture report reduced estimates for US maize and soya bean harvests, trimmed its maize and soya output forecast for drought-hit Argentina and cuts its outlook for the wheat crop in flood-hit Australia.

The report sent grain prices soaring and the rally continued in Asia yesterday.

The rise in food prices so far has led to differing responses from governments, pointing to the difficulty of deciding how to handle the issue.

For China, maize prices are just too high, so it has canned a proposal to import millions of tons of the grain in 2011, according to two industry sources with knowledge of the plan.

The initial Chinese proposal had been drawn up as a way to combat food inflation, a worry for Beijing because China’s food inflation is running in double digits.

China was a major factor behind the 2010 rally in maize prices after it imported about 1.5 million tons from the US to mark its first major purchase in 15 years.

The country’s rising currency is also fuelling expectations in commodity markets of higher import demand.

South Korea, on the other hand, unveiled measures yesterday to try to calm prices by reducing import tariffs on some items, including fish and powdered milk. The cabinet held an emergency meeting on Wednesday over the widening spread of foot and mouth disease in cattle that has raised pork and beef prices.

The central bank also raised interest rates yesterday to combat what it said was a growing inflation threat, following a rate hike in Thailand on Wednesday, and the Seoul government froze electricity tariffs and railway fares.

In another response, Pakistan signed deals to sell surplus wheat stocks for the first time in three years to take advantage of higher prices.

India also promised to announce anti-inflation measures, which local media said would include a ban on wheat product exports and trading in some commodities.

Data earlier showed that India’s food inflation pulled back slightly from a year high of more than 18 percent to just below 17 percent.

India’s main price measure, the wholesale price index, showed inflation at 7.48 percent in November, which analysts said would prompt the central bank this month to raise rates.

India’s food inflation is the highest among big economies in Asia and is an issue particularly sensitive to the government because roughly two out of every five Indians live on less than $1.25 a day, the World Bank’s measure of poverty.

Finance Minister Pranab Mukherjee called for calm, saying: “We have analysed the situation. We have indicated what further steps we are going to take.”

Relieving some of the pressure in India, onion prices fell nearly 16 percent on the country’s largest wholesale market after new crop arrivals.