OREANDA-NEWS. May 17, 2011. Global food prices, which posted record increases in the first two months of 2011, are again threatening to push millions of people in developing Asia into extreme poverty, says a new report from the Asian Development Bank (ADB) entitled Global Food Price Inflation and Developing Asia, reported the press-centre of IBC.

The report says that sharp increases in the cost of many Asian food staples since the middle of last year, coupled with crude oil reaching a 31-month high in March, are a serious setback for the region, which has rebounded rapidly from the global economic crisis.

The report notes that production shortfalls caused by bad weather along with the weak US dollar, high oil prices and subsequent export bans by several key food producing countries have caused much of the upward global price pressure since last June, with double digit increases seen in the price of wheat, corn, sugar, edible oils, dairy products and meat.

As in 2007-2008, rising global food prices are pushing up the cost of food to the consumer in developing Asian economies. But global prices are only one factor influencing local food prices. For countries that import food, including the Kyrgyz Republic, domestic food prices are also dependent on the exchange rate, trade policy, levels of subsidy and other policy measures.

Domestic rice and wheat prices in many developing Asian economies are following the rise in international grain prices but there is much variation. From June 2010 to February 2011, international wheat prices rose by 99.6%. Over the same period, domestic retail wheat prices in the Kyrgyz Republic increased by 67.1%, while domestic prices in Tajikistan rose between 30% and 40%. In Azerbaijan the increase in the price of wheat was between 20% and 30%; while in Kazakhstan and Armenia domestic price increases were less than 10%.

The ADB study shows that a 10% rise in domestic food prices in developing Asia, home to 3.3 billion people, could push an additional 64 million people into extreme poverty based on the \\$1.25 a day poverty line. The report adds that if the global food and oil price hikes seen in early 2011 persist for the remainder of the year, economic growth in the region could be reduced by up to 1.5 percentage points.

In the short term, the pattern of higher and more volatile food prices is likely to continue the report says, noting that global grain stocks have fallen. Adding to this are structural and cyclical factors present during the 2007-2008 crisis, including rising demand for food from more populous and wealthier developing countries, competing uses for grain, shrinking available agricultural land, and stagnant or declining crop yields.

Asian governments have already taken many short term measures to cushion the harsh impacts of food price inflation, including stabilizing prices. However, rising demand for food from developing Asia and low food productivity mean policymakers must also focus on long-term solutions to avert a future crisis.

“To avert this looming crisis it is important that the country undertakes efforts to stabilize food production, with greater investment in agricultural infrastructure to increase crop production and expand storage facilities. It must also strengthen social safety nets, and calm speculative activity in food markets,” said Rie Hiraoka, Country Director of ADB’s Kyrgyz Resident Mission.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2010, ADB approvals, including co-financing, totaled \\$17.51 billion. In addition, ADB's ongoing Trade Finance Program supported \\$2.8 billion in trade.