Rice Shortages Causing Food Crisis in Asia

Philippine Rice Farming

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HONG KONG – The rising cost of food is driving Asian inflation rates higher, increasing the stakes for a successful harvest this year in a region still bruised by the 2008 food crisis.

[ASIAFOOD]

Prices for rice, sugar, milk, and in some places, fruits, vegetables and cooking oils, have risen in recent months, putting pressure on overall consumer prices. The region’s most important economies, including India, China, Thailand, Philippines and Indonesia, are all grappling with how to handle rising prices without snuffing out their economic rebounds. Food-price increases are leading to higher inflation rates across much of Asia, though energy costs and tighter labor markets are also putting pressure on prices.

Asia was hit hard in 2007 and 2008 when shortages of foodstuffs, especially rice, led to hoarding and riots. Armed guards were dispatched to protect rice warehouses in Thailand and the Philippines; Indonesia deployed border agents to prevent smuggling.

Some analysts warn that the structural issues that caused the 2008 food emergency—too much demand and not enough food—are still in place.

For now, prices aren’t near levels that would create major dislocations. For example, in Bangkok, rice is trading at $592 a ton, according to the Thai Rice Exporters Association, after rising 10% from September through December to $618 a ton.

But prices are climbing and businesses hit by rising food costs in 2008 are again feeling the heat. Macquarie Group analysts recently downgraded Hong Kong fast-food company Café de Coral, citing higher food prices. Many of Café de Coral’s dishes are a combination of meat and rice.

A company spokesman said in an email that food prices are a challenge.

“We are not able to raise prices across the board and we have to absorb a substantial portion of the increases,” the Café de Coral spokesman said. “We will need to change the menus periodically to accommodate some of these increases.”

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