According to the ADB's chief economist, Changyong Rhee, even if Asian economies have weathered recent economic shocks, "for poor families in developing Asia, who already spend more than 60 per cent of their income on food, higher prices [will] further reduce their ability to pay for medical care and their children's education.”
In many Asian economies, a 10 per cent hike in domestic food inflation can push an additional 64 million people into extreme poverty, a situation defined as living on less than US$ 1.25 a day.
In fact, food prices will continue to be very “volatile”, the ADB noted, especially because of declining grain stocks.
Corn prices were up by 90 per cent whilst wheat and soybeans increased by 40 per cent on global commodity futures markets in the past year. Rice futures surged to a two- month high on the Chicago Board of Trade yesterday.
Mother Nature has also played a negative role. Last year, bad weather and natural disasters, including flooding in Pakistan and fires in Russia and Ukraine, have negatively affected food output.
A weak US dollar (the international currency) and rising fuel prices did not help either. Indeed, oil traded at US1.57 a barrel today, its highest point in 31 months. This represents a 22 per cent climb this year.
Some countries responded to higher food prices by banning the export of certain food items, cutting taxes and duties on imports and offering subsidies to families and farmers.
For the ADB, such measures may be useful on the short run but eventually prices will go up again.
“To avert this looming crisis it is important for countries to refrain from imposing export bans on food items, while strengthening social safety nets,” Rhee said.
At the same time, "Efforts to stabilize food production should take centre stage, with greater investments in agricultural infrastructure to increase crop production and expand storage facilities," he added. This way, food produce is not wasted.