Food prices stir poverty concern

The price of coarse rice, the staple food of poor Bangladeshis, has more than doubled in a year [EPA

The International Monetary Fund has said that rising food prices threaten to undermine gains made in cutting poverty and further strain a global economy already hit by a financial crisis.   The warning comes after riots related to increasing food prices rocked Haiti and Egypt. The increases are caused, in part, by drought in Australia and in central Europe, and more demand for food in increasingly Asian countries, Dominique Strauss-Kahn, IMF managing director, said on Thursday. Strauss-Kahn's comments came on the eve of a meeting of finance ministers and central bank chiefs of the Group of Seven industrial countries in Washington DC.   Biofuels link   The increased use of grains to produce biofuels, first heralded as a way to cut greenhouse gases, combined with increased demand for food in emerging market economies, is contributing to grain shortages and food riots.   In video Starvation fears in Bangladesh "Food prices, for instance, increased by 48 per cent since the end of 2006 until now, which is a huge increase, and it may undermine all the gains we have obtained in reducing poverty", Strauss-Kahn said.   Riots over food price rises began in southern Haiti earlier this week and quickly spread to the capital Port-au-Prince, where tens of thousands took to the streets.   Four were killed in the disturbance, while UN peacekeepers drove away rioters used rubber bullets and tear gas to drive away rioters from the presidential palace.   Food prices, which have risen 40 per cent on average globally since mid-2007, are most damaging to poor nations such as Haiti, the poorest country in the Americas.   Hunger palliative   Most Haitians live on less than $2 a day, while reports indicate the most desperate have been forced to turn to a traditional hunger palliative of cookies made of dirt, vegetable oil and salt.   Meanwhile, at least seven people have died in Egypt in riots earlier this week, sparked partly by rises in the price of bread.   Similar riots have been reported in Burkina Faso, Mauritania, Indonesia and Peru.    UN peacekeepers have had to be called in to control Haitians rioting over price rise [AFP] Robert Zoellick, World Bank president, said on Thursday that while developed nations struggled with high fuel cost of fuel to run their cars, poor people in developing nations were struggling to feed themselves.   "In many developing countries, the poor spend up to 75 per cent of their income on food. When prices of basic foods rise, it hits hard", he said.   "In just two months, rise prices have skyrocketed to near historic levels, rising by around 75 per cent globally and more in some markets - with more to come."   Zoellick said the world needs to recognise food price inflation is contributing to a growing emergency, one which the UN World Food Programme has said requires $500 million just to fill immediate need.    Persistent inflation    The World Bank say food price inflation is not a short-term phenomenon but will likely persist through 2008 and 2009 before demand slackens due to high prices.   Most people in the world's wealthiest countries take food for granted.   Even the poorest fifth of households in the US spend only 16 per cent of their budget on food.   Rising bread prices in Egypt have contributed to protests that led to several deaths [EPA] By contrast, Nigerian families spend 73 per cent of their budgets to eat, Vietnamese 65 per cent, while Indonesians allocate half.   Last year, the food import bill of developing countries rose by 25 per cent as food prices rose to levels not seen in a generation.   World financers have also been adding to the food price problem.   Commodities, as an asset class, have attracted investors looking not only for a safe haven from the carnage in highly leveraged mortgage investments.   From 2005 through 2007, world wheat prices rose 70 per cent, corn gained 80 per cent, and dairy prices nearly doubled, up 90 pe rcent. A senior UN official has said that global investment funds and the weak dollar are largely to blame for the world's rise in food prices. 'Speculative attack' "The crisis is a speculative attack and it will last", said Jose Graziano, the UN food and farm organisation's regional representative for Latin America and the Caribbean. "The lack of confidence in the (US) dollar has led investment funds to look for higher returns in commodities ... first metals and then foods." "In many developing countries, the poor spend up to 75 percent of their income on food." Robert Zoellick, World Bank President  Investors have speculated in commodities including wheat, corn and rice because stocks in recent years have been drawn down by rising demand in emerging markets and supply shortages due to adverse climate in key producer nations, Graziano said. The move from greenhouse gas-emitting hydrocarbons to biofuels is also contributing to high food prices, but it is not driven by market forces alone. The IMF has calculated that corn ethanol production in the US accounted for at least half the rise in world corn demand in each of the past three years. Washington provides a subsidy of 51 cents a gallon to ethanol blenders and slaps a tariff of 54 cents a gallon on imports. In the European Union, most countries exempt biofuels from some gas taxes and slap an average tariff equal to more than 70 cents per gallon of imported ethanol.

Source: Agencies

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