Food price rises impacting Asia Pacific consumers

Food prices have risen sharply since October 2007 on international markets, owing to supply shortages. This is particularly affecting basic staples such as rice, wheat, grain and soya, which form much of the staple diet of lower-income consumers in the Asia Pacific region. Rising food prices will have negative implications for consumers in Asia Pacific, in terms of higher prices for basic foodstuffs and the eroding effect of rising inflation on consumer purchasing power. Falling consumer spending will be negative for business profits.

Key Points
The price of some basic foodstuffs rose by more than 100% in the first half of 2008 with wheat, rice, soya and grain the worst affected;
A major reason behind these price rises has been an abrupt disruption to food supplies, with a series of floods in Bangladesh and India in 2007 and 2008 seriously damaging rice crops;
Increased demand for food from fast-growing populations such as China is also pushing up prices;
In addition, growing demand for biofuels is reducing the land available for agricultural production, reducing food output;
Rising food prices are reducing consumer disposable income, while some of the poorer sections of society are unable to purchase sufficient food;
This is particularly negative for low-income rice-dependent countries in the region such as Bangladesh and Myanmar, with low-income sectors in India and China also suffering;
Higher fuel prices are also increasing the cost of food, since it now costs more to transport it and to run agricultural machinery. Higher food prices, combined with surging oil prices are pushing up inflation and eroding consumer purchasing power further;
Government responses have been divided between imposing quota limits on agricultural exports and allowing interest rates to rise to curb inflation.

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