Wednesday , October 20 2021

Southeast Asia and Food Price Inflation: Double Whammy

  • Opinion by Paul Teng
  • Inter Press Service
  • Across the world, climate change and Covid-19 disruptions have led to rising food prices in the past year. Southeast Asian countries, which have not been immune to such challenges, need to build resilience in their food security policies.

Southeast Asia is not alone when it comes to the challenges posed to food security. Indeed, most of the world has been grappling with increased food prices in the past year. The United Nations’ Food and Agriculture Organization (FAO)’s latest report of the benchmark Food Price Index — which tracks the prices of meat, dairy, cereals, vegetable oils and sugar — rose for the 12th consecutive month in May 2021 to 127.1, its highest level in nearly ten years.

One of the drivers for the price increases is vegetable oil, notably palm oil, whose prices have been increasing since the fourth quarter of 2020. But global cereal prices also shown a significant rise in the past months. Dry weather and production disruptions due to Covid-19 coupled with high global demand led to the depletion of palm oil inventories, resulting in a classical demand surge-supply slump situation. This has inevitably driven up up prices. Biodiesel demand also increased the demand for soybean oil.

Southeast Asian countries were only just recovering in 2020 from the effects of the African swine fever which killed millions of hogs, and from large areas of crops devastated by the Fall Army Worm (which started in the Americas and proceeded to afflict sub-Saharan Africa, the Indian sub-continent, China and Southeast Asia). In the same period, countries across Southeast Asia implemented measures to curb the Covid-19 pandemic. Movement controls disrupted food supply chains, increased losses of agricultural produce on farms, and increased food waste. The net result is that food insecurity and poverty have increased in many Southeast Asian countries in the past year.

Beyond the impact of the pandemic, climate-related phenomena have affected agriculture in food producing economies of Southeast Asia and in the countries which conduct food trade with the region. The ongoing drought in parts of western and mid-western United States, important agricultural areas, have impacted harvestable crop areas and potentially will lower crop yields. As the US is an important exporter of wheat, soybeans and maize to Southeast Asia, there is real danger that price inflation of basic food commodities will increase further.

According to the FAO, 10 per cent of Southeast Asia‘s population of 650 million suffers from food insecurity. So any increase in food prices will drive more people to hunger and reduced food intake. But the situation in Southeast Asia cannot be viewed in isolation from countries that are large food importers. Demand in China, one of the world’s biggest food importers, has been strong as the country has recovered from the pandemic earlier and faster than the rest of the world. Different parts of China have suffered from drought in the south and floods in the east. Much agricultural production occurs in the vicinity of the rivers and their flood plains, and even a small decline in production could inevitably lead to a large absolute increase in food demand due to China’s large population size. In past years, when China had gone shopping for food in the international markets, Southeast Asian countries have had to compete for the limited amounts available, especially in staples like rice.

Southeast Asia’s growing middle class has concurrently increased demands for wheat products and animal protein, both of which cannot be met by the production of animal feed crops like soybean and maize in the region or Asia as a whole. The FAO, in its analyses, has attributed part of the food price increases to supply-side issues such as harvest delays and reduced crop yields in exporting countries like Brazil.

It would appear that the Covid-19 pandemic is far from over in Southeast Asia, with the resurgences of 2nd and 3rd waves of infection. Natural calamities linked to climate change are further anticipated to negatively affect food production in many of the food exporting countries. For the region, the typhoon (cyclone) season of 2021 is only just beginning. This will put a strain on the ability of the region to grow enough food. Furthermore, reductions and disruptions in food supply chains leading to price spikes appear likely to continue in 2021 and beyond. Asian countries are also likely to implement tighter biosecurity measures such as improved animal health requirements and increased surveillance as part of strategies to prevent the spread of zoonotic diseases. To avoid the chaos created during the 2007-2008 food crisis, openness in reporting outbreaks and transparency in data sharing will be key to avoid panic buying.

In the near future, the effects of climate change are likely to increase rather than decrease, and together with the disruptions caused by the pandemic, will potentially create a ‘perfect storm’ for food supplies and prices. So ‘preparedness’ as a policy will be important for ASEAN to build resilience in its food security.

This article was first published by ISEAS – Yusof Ishak Institute as a commentary in Fulcrum.” With a link back to the original article — https://fulcrum.sg/southeast-asia-and-food-price-inflation-double-whammy/

Professor Paul Teng is an Associate Senior Fellow in the Climate Change in Southeast Asia Programme of ISEAS-Yusof Ishak institute. He is also Dean and Managing Director of NIE International, Nanyang Technological University Singapore.


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© Inter Press Service (2021) — All Rights ReservedOriginal source: Inter Press Service



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