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Wednesday, 17 September 2008

Food prices likely to remain high

MANILA - THE high prices of food worldwide are not likely to fall any time soon, and there are no quick solutions to the problem, the Asian Development Bank (ADB) warned on Tuesday.

'Scarcity is back, hunger is growing, and rapid economic growth is threatened. These are difficult times,' the Manila-based lender said in the update of its annual Asian Development Outlook.

'In view of these difficulties, it seems unlikely that basic food prices will return to their real long-run downward trend.'

The regional lender did note that food prices were 'substantially below the peaks of the previous world food crisis in 1973-74.' But it said this time, price increases had been 'sharp and disruptive,' affecting the poorest people and food-importing countries the most, increasing inflationary pressure and threatening economic growth.

Studies blamed the high prices on various causes including population growth, a slowdown in agricultural production, the depreciation of the US dollar, high oil prices and the increased demand for biofuels, the ADB said.

Short-term speculation had also fed the price increases, it said.

The bank also said higher prices for some crops had led countries like India, Thailand and Vietnam to impose export controls while importing countries like the Philippines scrambled to find new stocks, further fuelling the crisis.

In the past, food price crunches were solved by boosting output, but there is now less high-quality farmland available, and agricultural yields have not increased for 'decades' due to lack of investment in research, it said.

To make matters worse, the cost of inputs like fuel and fertilizer are now higher and rising rapidly, the ADB said.

The bank said even when the panic and speculation subsides, the new 'equilibrium price' for rice is likely to be 50-60 per cent higher than it was in 2007.

'Other basic food commodities are likely to exhibit similar patterns,' the ADB added.

'Domestic policies will trump international cooperation whenever politicians see a short-run advantage in closing borders or subsidising trade,' the ADB said.

While it called for increased food aid to affected populations and the setting up of safety nets for the poor, 'the only sustainable solution for these households is inclusive, or pro-poor, economic growth that provides reliable real incomes and stable access to food,' the ADB said.

It called for more investments in agriculture especially in basic food crops to spur growth, noting that such an effort should have been made decades ago. -- AFP

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