By Edward West
Staple food prices continued to soar on world markets as governments move to head off a global food crisis. Food prices have been rising relentlessly over the past 18 months due to a combination of factors, including increased demand from fast-growing countries such as China and India, rising production costs like the price of fuel, shrinking resources such as the availability of land and water, and sharply increased speculative trading of all globally traded commodities.
This week, South Africa's Finance Minister Trevor Manuel highlighted “huge supply constraints" in the food market as one of the key crisis factors in the world .
“Food prices are very bad. It’s not a happy picture,” he said.
In Johannesburg, on Thursday, April 17, 2008, thousands of Congress of South Africa Trade Unions (Cosatu) members marched through the city’s streets in protest against rising food and electricity prices. Their demands included a moratorium on the price increases of basic foods. Cosatu warned of further mass action if its demands were not met.
Econometrix chief economist Azar Jammine said the prices of internationally traded staples such as wheat, rice and maize had doubled in the past 18 months and he expected that there would still be a “feed through” of price increases in SA, because food prices had not risen as high as they had in other countries.
Jammine said it was “very dangerous” for Cosatu to call for a moratorium on food prices because it could put food processors, retailers and farmers out of business and worsen the situation.
He said many African countries were facing food shortages because their small farmers were no longer able to supply the urban areas, and he warned about “throwing the baby out with the bath water” in SA’s land reform programme by creating too many small farmers, which would prove an uneconomic way to farm in the long term in terms of national food security.
Meanwhile, China, the world’s largest grain producer, yesterday curbed fertiliser exports, and the Philippines failed to buy all the rice it needs as record prices heightened concern that the world is running short of food.
China would increase export duties on all fertilisers to as much as 135% to safeguard local supplies, its ministry of finance said.
And the Philippines received offers for just two-thirds of the 500000 tons of rice that it sought to buy.
“The prices are just too high,” said Vic Jarina, the deputy director of the Philippines National Food Authority.
Rice futures in Chicago rose 2,5% yesterday to a record $23,12 for 100 lb, bringing the gain this year to 66%. Wheat, maize, palm oil and soybeans have all risen to their highest levels this year.
The rally, including record crude oil prices, has stoked concerns that inflation will rise and civil unrest could spread. The food crisis was of “emergency proportions”, United Nations Secretary-General Ban Ki-moon said this week.
Turkey said yesterday it would abolish import duties on rice and Egypt said it would reduce land allocated to rice.
Rice, the staple food of half the world, was at $23,02 on the Chicago Board of Trade at midday in London yesterday.
The World Bank has forecast that 33 nations, from Mexico to Yemen, could face social unrest because food and energy costs have increased for six years in a row. Haitian Prime Minister Jacques Edouard Alexis was voted out of office this month by the country’s senate after violent protests over food costs.
China’s finance ministry said: “If we can effectively control exports, we can ensure fertiliser needs for planting in spring, and curb the rising trend of domestic fertiliser prices.”
If China effectively stops exporting fertilisers, it could be “fatal” for the global supply of some products, such as ammonium phosphate, Xu Hongzhi, an analyst at Beijing Orient Agribusiness Consultant, said.
China also started to tax wheat exports at a rate of 20% this year. The tax for maize and rice was set at 5%.
Food-importing countries worldwide are cutting taxes to try to secure supplies.
Turkey would abolish import duties on rice to counter speculation that had pushed prices up in recent weeks, Agriculture Minister Mehdi Eker said yesterday.
Egypt, Africa’s largest rice exporter last year, would reduce the land allocated for planting the grain to save water and encourage farmers to grow more maize, Agriculture Minister Amin Abaza said this week.
“As a general rule, export taxes, quotas or bans do not make economic or development sense,” European Union Trade Commissioner Peter Mandelson told a European Parliament committee in Brussels yesterday. // Business Day With Bloomberg
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