Food crisis
April 11, 2011
The adverse impact of countries stockpiling and imposing export bans to deal with rising food prices became clear earlier this year when global food prices hit a record high.
Bangladesh, for instance, stockpiled rice to deal with the rising prices and Myanmar suspended rice exports in an effort to keep prices down. This had a negative impact on the already volatile cereal markets.
"Trade restrictions create more price hikes and cause panic among importing countries," said Katsuyi Matsunami from the Asian Development Bank. "Just as in 2008 when the Philippines imported rice at no matter what cost - that pushed up the international rice price."
Matsunami added that the countries which had actually imposed the export ban did not benefit much, as domestic rice prices also went up.
"In the hope of restricting exports, rice exporters thought that they could maintain an ample domestic market and rice prices would remain low," he said.
Stockpiling not the solution
When the international rice price goes up, Matsunami explained, "the domestic rice traders also see this as a tremendous business opportunity" that leads to hoarding and further increases the price. He thinks that food security must be achieved within a regional context because "commodities are so interlinked and international market prices affect everything."
ASEAN approach
Having learned a lesson from the 2008 food crisis, ASEAN countries are now working towards a collective food security goal by sharing information and setting up regional rice reserves.
"Trade ministers have already agreed that we will refrain from any trade distorting actions or practices," said ASEAN's deputy secretary general Dr. Pushpanathan Sundram.
He said he was not so concerned about the staple rice "but there are other commodities like sugar, edible oil, and wheat where the prices are going up. We need to monitor the situation closely, so that we can actually come up with appropriate regional responses."
Global cereal stocks - particularly wheat and maize - are expected to fall sharply this year, due to growing demand and a decline in world production.
The UN Food and Agriculture Organization has said that urgent coordinated action, including improved market regulation, is needed to ensure food supply security. It projects a further rise in food prices over the next decade, especially in Asia.
Author: Sherpem Sherpa
Editor: Anne Thomas