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Cheap food era is over, says ADB

SINGAPORE: The rice stocks across Asia “are the lowest in decades” but there is no cause for a “doomsday picture of huge scarcity,” according to the Asian Development Bank (ADB).

Recognising, at the same time, that the current “serious situation” of escalating food prices has had “a very severe impact on the poor,” the ADB is cautioning countries such as India and Thailand against imposing or sustaining any ban on rice exports.

ADB Managing Director-General, Rajat M. Nag, said here on Tuesday that the bank would also urge the developed countries to “re-think the bio-fuels programme, including the whole issue of subsidies” in that sphere. The developed bloc should also consider steps to “conclude the Doha Round of global trade talks for agriculture in particular.” Success on that front “will be a very major boost to the developing-Asia’s farmers.”

Mr. Nag, who was addressing the Singapore-based Foreign Correspondents’ Association, said the developing countries should, for their part, increase investments in farm-related infrastructure such as irrigation systems and rural finance. Last year, the ADB provided India with $1 billion towards rural finance.

“We just have to accept that the era of cheap food is over, if the era of cheap oil is [also] over,” he said, but emphasised that “the impact of the rice price increases in Asia is very, very serious” for nearly 1.2 billion people, comprising nearly 600 million on each side of the income quotient of $1 a day. Before the current price rises, they were already spending about 40 to 50 per cent of their earnings on food. With these increases, the comparable figure, in some parts of South Asia at least, had now gone up to 80 per cent.

Tracing the spiralling prices of rice varieties to the escalation in the cost of production as broadly caused by the fuel situation, Mr. Nag said: “In the last three years, food prices as a whole have increased by over 80 per cent; in Asia, rice is the key staple and its price has increased almost three times the levels of a year ago and almost doubled in the first months of this year.”

Outlining the “cyclical and structural factors” on the rice supply side, the top ADB executive said: “On a regional balance [in Asia], there is enough supply. I fully empathise with India or Thailand or any other country, which says: ‘We have got to look after ourselves first and hence ban exports. India has banned non-basmati rice exports. Thailand is considering measures. I would strongly urge them to take a regional perspective, not only because it is good to look after your neighbours in times of hardship but also because it is good economic policy nationally. Ban on exports and price controls have a counter-productive effect on the micro-decisions of farmers.”

There was no indication of any move by rice-exporting countries to form a cartel.

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