Food Price Hike Worsens Poverty in Asia

May 2, 2011 by

Global Geopolitics & Political Economy / IPS

By Marwaan Macan-Markar

BANGKOK, May 1, 2011 (IPS) – An annual meeting of Asian finance ministers and central bank governors in Hanoi is set to address the fate of 64 million people in the region on the brink of extreme poverty. They are the worst affected by soaring food prices, which have hit record highs in the first two months of this year.

"The issue of food price inflation and food security will indeed be one of the key topics of discussion at the Asian Development Bank’s 44th annual meeting," says Xianbin Yao, director general of the regional and sustainable development department at the Manila-based international financial institution. "(We hope) to focus our discussions on the long term structural adjustments that are needed to secure food supplies.

"If left unchecked, the food crisis will badly undermine the recent gains in poverty reduction made in Asia," he said in an interview to IPS. "We estimate that a 10 percent rise in domestic food prices in developing Asia could push an additional 64 million people into poverty, based on the 1.25 (dollar) a day poverty line."

In a report released ahead of the annual meeting in the Vietnamese capital, to be held May 3-6, the Asian Development Bank (AsDB) warned that this ascent of prices among many Asian food staples is "likely to continue" a threat to the continent’s nearly two billion people who live on less than two dollars a day.

The region is home to two-thirds of the world’s poor, some 600 million people, who live on less than 1.25 dollars a day. That number stemmed from the rise of those living in absolute poverty before 2008, when it was 555 million people. The 2008 global financial crisis and the food crisis of that year combined to undermine the food security of Asia’s most vulnerable.

The rising food prices since mid-2010 hit the region that is home to 3.3 billion of the world’s population because poor families in developing Asia spend over 60 percent of their income on food, reveals the AsDB report, ‘Global Food Price Inflation and developing Asia’. In developed countries, by contrast, families spend about 10 percent of their income on food.

While the soaring price of rice was the root to the 2008 food crisis, this time around it is a different basket of commodities, including cereals like wheat and corn, dairy, meat, oils and fats and sugar. Countries like Indonesia have had to grapple with rise in chili prices, China has seen the price of garlic double, India endured price rises in onions, and South Korea faced similar price inflation for cabbage, an important ingredient for kimchi, the country’s best known national dish.

The consumers most affected have been "net buyers of food, who are pretty much all urban consumers, especially the urban poor," says Purushottam Mudbhary, coordinator of the economic, social and policy assistance group at the Asian regional office of the Food and Agriculture Organisation (FAO). "But more importantly, it also includes rural landless workers and small farmers."

The current rise in the price of crude oil, which hit a 31-month high in March, has been one among a range of factors that has combined towards this upward spiral of Asian food, since diesel is needed for pumps in the irrigation systems, and the extensive use of fertiliser depends on petrochemicals. High fuel costs have also added to the pre- and post-harvest transport costs.

Research by the Rome-based U.N. food agency has further singled out extreme weather over the past year, ranging from the summer drought that swept through the wheat fields of Russia and Central Asia, the winter drought in China and the floods in Australia.

The global race to produce bio-fuel from sugar cane and palm oil has also left its mark on the food supply chain, Mudbhary said in an interview. "There is a competition for bio-fuel crops and food crops in Malaysia, Thailand and Indonesia."

For its part, the AsDB identified the "structural and cyclical factors that were at play during the 2007 and 2008 crisis" to have played a part this time, too, including "rising demand for food from more populous and wealthier developing countries", shrinking available agricultural land and stagnant or declining crop yields.

"It is important for policy makers in the region to focus attention on strengthening the entire food systems from farm production, processing, retail and distribution to consumption," says the Manila- based bank’s Yao. "A major concern is efficiency of using scarce resources such as land, water and energy particularly in large countries such as China and India."

But some of the AsDB’s critics are far from impressed at other measures the international lender has identified as pivotal to help the region overcome the emerging food crisis, ranging from a need to increase investments in agriculture infrastructure and stronger market integration plans to long-term research through international and national agriculture centres.

"The Bank itself must evaluate its operations in agriculture and natural resources in general and in wealthier countries in particular," says Avilash Raoul, executive director of the NGO Forum on ADB, a Manila-based umbrella group of non-governmental organisations (NGOs) that monitor the bank. "Does ADB have a comprehensive strategy let alone policy on agriculture which can guide its operation to addressing the food crisis in Asia? It doesn’t have.

"Substantial number of the poor and the vulnerable impacted by food price inflation are located in areas of rain-fed agriculture having difficulty access to irrigation," he said in an interview. "NGO Forum is demanding a coherent agriculture policy that should be immediately developed with the participation by a large number of farmers, especially by small farmers in the most vulnerable areas."

All rights reserved, IPS – Inter Press Service, 2011.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Asia, Economy, Poverty, Report Tagged With: ,

China Learns to Live With Inflation

February 26, 2011 by

Global Geopolitics & Political Economy / IPS

By Mitch Moxley

BEIJING, Feb 26, 2011 (IPS) – At Mr. Ma’s fruit and vegetable shop, located in a historic hutong alleyway a few blocks from the Lama Temple, the impact of China’s growing inflation is evident. In recent months, the prices of Mr. Ma’s products have soared. Eggs have gone from RMB 7 (6.5 RMB to a dollar) to RMB 10 per kilogram. Tomatoes have almost doubled. Cabbage has tripled.

Despite the government’s pledge to rein in food prices, Mr. Ma’s not so sure – a sentiment shared by a growing number of ordinary Chinese. "Prices will definitely keep rising," he tells IPS. "There’s not much we can do."

Soaring inflation has been the dominant news story coming out of China in recent months. In January, consumer prices in China climbed 4.9 percent compared to the same month a year ago, according to government figures. That was lower than expected, but still cause for concern. Critics claimed that the statistics bureau had recalculated the index to give less weight to food costs, meaning inflation might have actually been higher than reported.

Consumer confidence dropped four points to 100 in the fourth quarter of 2010, the lowest level since 2009, indicating concern among Chinese about inflation’s impact on their daily lives and salaries, according to a survey published by the China Economic Monitoring and Analysis Centre and the Nielsen Company, a media research firm.

According to the survey, numbers above 100 indicate degrees of optimism, while numbers below the 100 mark reflect pessimism. In the second quarter of 2010, Chinese consumer confidence was at 109 points.

The cost of food, most notably fruits and vegetables, has been climbing for the past year, and food prices now rank as the country’s third largest concern, behind income stability and health, the study found. January’s food prices soared 10.3 percent from the month before, and 84 percent of consumers believe food prices will continue to climb in the next 12 months.

Economists also expect more price increases the months ahead, as demand outstrips food supply and commodity prices remain high. China analysts have said that inflation is a major concern for the Communist Party, which has based its legitimacy to rule on economic prosperity. In many areas of China, families spend up to half their income on food.

For ordinary Chinese, life goes on. Small business owners interviewed by IPS on a recent morning say that although they were concerned about rising prices, most weren’t expecting a dramatic drop in business.

"Yeah, the prices are going up, but there’s nothing we can do," says Ms. Shao, the owner of a tiny convenience store a few doors down from Mr. Ma’s vegetable shop. She says that the cost of most of the items she sells is on the rise, including milk, sugar, beer, cooking oil and flour. Cases of a popular brand of instant noodle are up from RMB 36 last fall to RMB 45 today. All major beer labels are hiking prices.

Ms. Shao has run this convenience store for eight years, and these are the highest prices she’s seen. But she’s not overly concerned – business is down slightly, but not significantly.

"People seldom complain. They know about inflation. You have to eat."

On a busy street in the heart of central Beijing, Boss Liu barely has time for questions, his bread stand is so busy. His product has gone up from RMB 0.6 (less than a penny) to RMB 0.8, and he expects to sell each shao bing – layered flatbread with sesame seeds on top – for RMB 1 each soon enough.

He’s not too confident the government will be able to control prices, but his business has been largely unaffected by rising inflation.

"Some old people aren’t buying them anymore, but maybe just 1 percent of customers. We’ll be OK."

The central government in Beijing has promised to rein in inflation by raising bank reserve requirements and interest rates. The central bank recently raised the reserve requirement ratio for banks by 50 basis points, or 0.5 percentage points, and it has raised interest rates three times since October, with more increases likely.

Beijing has tried to calm public concerns by paying subsidies to poor families, keeping prices low at university cafeterias and ordering local governments to ensure vegetable markets are well stocked.

But the government’s pledges offer little comfort to Ms. Tong, the owner of a beef noodle shop near Andingmen subway station. Rising costs are eating into her profit and she’s having trouble retaining staff. Over her lunch she says she’s thinking about closing shop and heading back to her home province of Shandong.

"Nobody wants to work here. They have to work long hours – it’s hard work," Ms. Tong says. "The price of materials keeps rising and workers keep asking for raises. I can’t afford to keep this place anymore."

All rights reserved, IPS – Inter Press Service, 2011.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Economic Policy, Economy, Featured Tagged With: ,

Austerity Not a Solution

September 24, 2010 by

theREALnews Network

September 24, 2010

Robert Pollin: Stimulus and debt not creating inflation.


Filed Under: Budget, Economic Crisis, Economic Policy, United States, Video Tagged With: ,

Little Change in Inflation Picture; CPI down 0.1 Percent in April

May 19, 2010 by

Center for Economic and Policy Research, CEPR, May 19, 2010
Read the article in its original form.

By David Rosnick

Tuition rose twice as fast as overall inflation over the last ten years.

Falling energy prices pushed down the consumer price index 0.1 percent in the month of April.  After rising 2.7 percent from January of 2009 to January of 2010, consumer prices were unchanged over the first three months of this year.  Core prices were unchanged in April.  Inflation in the core index has risen at a 0.6 percent annual rate over the last three months and 0.3 percent over the last six.

After falling sharply in the second half of 2008, consumer prices rose at a 4.8 percent annualized rate from May to August of 2009.  Since then, the three-month rate of inflation has declined to zero.  Energy prices had been a strong driver of inflation; the three-month annualized rate reached 57 percent in the three months ending last August before falling at a 7.6 percent rate since January.

prices-2010-05

Falling rents also continue to hold down core inflation.  Rent of primary residence was essentially unchanged in April and despite a 0.1 percent increase in March, has remained flat over the last six months.  Owners’ equivalent rent (OER) of primary residences—which accounts for nearly four times as much of the CPI—fell less than 0.1 percent in April.  This was the sixth consecutive month of small decline in OER, and over that time it has fallen at a 0.7 percent annualized rate.

Falling energy prices helped push down transportation prices, which fell 0.5 percent in April.  Transportation prices have fallen at a 2.8 percent annualized rate over the last three months, after rising at a 14.2 percent rate over the previous three.  The previously-reported disinflation in the used-car market continued in April as prices rose only 0.2 percent in the month.  The cash-for-clunkers program drove the three-month rate of inflation in the price of used cars to an annualized rate of over 30 percent for the quarter ending in October, but has declined steadily since then.  Used car prices have risen at a 5.6 percent rate since January.

Apparel prices fell again in April.  Though apparel accounts for less than 4 percent of the overall CPI, prices have fallen at a 7.0 percent annualized rate over the last three months and 3.4 percent over the last six.

Elsewhere in the core index, medical care continues to be a source of price pressure—rising 0.2 percent in the month.  Among medical care costs, hospital and related services were again the fastest growing in April, though not as fast as the previous two months.  The price of hospital services rose 0.4 percent in the month—a 4.3 percent annualized rate of growth.  By contrast, those prices rose 1.1 and 1.0 percent in February and March, respectively.

Education prices rose another 0.5 percent in April.  Tuition, fees, and child-care prices have seen a 1.7 percent increase in the last three months—a 7.0 percent annualized rate of growth.  Tuition prices have averaged 5.9 percent annual inflation over the last ten years—more than twice as fast as the 2.4 percent inflation overall.

Non-agricultural export prices rose 1.4 percent in April, and have risen 6.0 percent over the last year.  At the same time, nonfuel import prices rose 0.5 percent.  The rise in both import and export prices has been concentrated in industrial supplies rather than consumer or capital goods.  The producer price indices largely tell the same story, as the price of core finished goods have risen at a 1.4 percent annualized rate over the last three months.

Non-food, non-energy crude prices have risen at a 43 percent rate over the last year, but this is in large part a recovery from the rapid fall in the second half of 2008.  Over the last three years, prices have risen at a 5.1 percent annualized rate.  Intermediate core goods show the same pattern.  Despite a sharp run-up and fall in 2008, and a current three-month rate of inflation over 11 percent, intermediate prices have risen a cumulative 8.2 percent over the last three years.

Overall, the inflation picture is not much changed since last month. The pressures at earlier stages of production are confined to supplies and materials, which have experienced large price booms and busts over the last few years, but producers have largely not passed these price changes on to consumers.  As a result, deflation is present in much of the core index and energy prices have begun to fall once again—leaving little threat of inflation.

CEPR’s Prices Byte is published each month upon release of the Bureau of Labor Statistics’ reports on the consumer price and the producer price indexes. For more information or to subscribe by email, contact CEPR at 202-293-5380 ext. 102 or warner [at] cepr [dot] net.

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This work by David Rosnick, published by CEPR, is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.


Filed Under: Economy, Featured, United States Tagged With: , ,