January 7, 2011 / 11:01 AM / 8 years ago

WRAPUP 1-G20 to tackle food prices as countries reassure consumers

 By Kim Yeonhee	
 SEOUL, Jan 7 (Reuters) - The Group of 20 leading economies 
will discuss ways to tackle soaring food prices that are 
stoking fears of a repeat of the 2008 food crisis, as some 
Asian countries sought to reassure nervous consumers on Friday.	
 Global food prices hit a record high last month, 
outstripping the levels that sparked riots in several 
countries in 2008, and key grains could rise yet further, the 
United Nations' food agency said this week. [ID:nLDE7041BM]	
 Policymakers' major concern is that if unchecked, rising 
food prices will lead to social and economic instability by 
stoking inflation, protectionism and unrest. 	
 Importantly, rising food prices could set back the 
recovery from the financial crisis by cutting into consumers' 
budgets in fast-growing emerging economies that are leading 
the global revival.	
 Working-group talks in the G20 are underway, aimed at 
improving global cooperation to resolve food security problems 
ahead of a summit in Paris later this year, said Rhee 
Chang-yong, who represents South Korea at the G20. 
[ID:nTOE70603V]	
 "France is emphasising food security. As a former host 
country of G20, we would like to deal with the price 
volatility problem thoroughly," Rhee said.	
 French President Nicolas Sarkozy has asked the World Bank 
to conduct urgent research on the impact of food prices ahead 
of G20 meetings later this year, a source familiar with the 
matter said.	
 
	
 Last year, wheat futures prices rose 47 percent, buoyed by 
bad weather including drought in Russia and its Black Sea 
neighbours. U.S. corn rose more than 50 percent and U.S. 
soybeans jumped 34 percent.	
 The UN Food and Agriculture Organisation said in a report 
on Wednesday that sugar and meat prices were at their highest 
since its records began in 1990. Prices were at their highest 
since 2008 crisis levels for wheat, rice, corn and other 
cereals.	
 During that crisis staple food prices soared and riots 
broke out in countries from Egypt to Haiti. Import prices 
jumped, forcing many countries' trade balances into a deep and 
costly deficit and several governments in Asia imposed export 
restrictions on rice.	
 Still, Robert Prior-Wandesforde, an economist at Credit 
Suisse in Singapore, said further adverse weather shocks would 
be needed to drive food commodity prices much above current 
levels.	
 "The estimated global and exporting countries' 
stock-to-use ratios of both wheat and rice are considerably 
higher today than in 2007-08, making shortages and drastic 
export bans unlikely," he said in a report.	
 Still, he forecast that food inflation in Asia outside 
Japan would rise to 15 percent by the middle of the year from 
9.5 percent in November, adding pressure at the margin for 
higher interest rates and currencies.	
 	
 CHILLIS, ONIONS AND RICE	
 In Indonesia, a fivefold rise in the price of chillis in 
the past year has underlined for many the rising cost of food 
that has driven the country's overall inflation to a 20-month 
high near 7 percent.	
 Farmers are operating around the clock patrols to protect 
their chilli plants and President Susilo Bambang Yudhoyono has 
urged households to plant crops in their gardens to help 
tackle inflation. [ID:nL3E7C60I7] [ID:nL3E7C70H6]	
 On Friday, the country's Chief Economics Minister Hatta 
Rajasa sought to reassure Indonesians, saying the government 
would do what was necessary to maintain food supplies to the 
country of 240 million people, the world's fourth-highest 
population.	
 "The food pressure is temporary," he told reporters. "The 
government will make sure there is sufficient food supply and 
keep rice stockpiles at 1.5 million tonnes," he said, adding 
the local harvest in February would ease food price pressures.	
 Rajasa said the government has moved to buy 1.3 million 
tonnes of rice for delivery ahead of the harvest in February. 	
 Thailand, the world's biggest rice exporter, offered its 
own reassurance. Commerce Minister Porntiva Nakasai told 
reporters the country would maintain 2011 rice exports at 
between 9 million tonnes and 9.5 million tonnes after shipping 
9 million tonnes in 2010. [ID:nSGE70604A]	
 The Philippines, the world's biggest buyer of the grain, 
said it would cut its 2011 imports by at least one half, 
compared with record purchases in 2010, further easing 
concerns of a tight rice market this year	
 Still, the head of the National Food Authority, which 
overseas rice imports, said the group might increase the 
minimum size of its buffer stock of rice to cover 40 days of 
demand, up from the current 30 days.	
 The head, Angelito Banayo, also urged the country to lock 
in its import needs as earlier as possible. [ID:nSGE70605O]	
 "We're quite worried that supply will become tight. That's 
why we want to lock in as early as possible our requirements," 
he said.	
 A senior food official in Bangladesh also said the country 
was worried about food security and had imported 250,000 
tonnes of rice from Vietnam to boost stocks.	
 "We are now at a comfortable position and can start 
selling rice at a subsidised price in a large scale to help 
the poor and head off a domestic price hike," said Ahmed 
Hossain Khan, the director general of the state grains buyer. 
[ID:nL3E7C70CW]	
 In South Asia, India said it has initiated talks with 
Pakistan to resume the purchase of its neighbour's onions, the 
price of which have in the past triggered protests over food 
inflation. Onion prices have jumped after weather damaged the 
Indian crop. [ID:nSGE70604C]	
 Many countries in Asia, including India and China, have 
seen food inflation jump to double digit levels. China has 
imposed price controls to try to ensure stable prices for 
consumers, and on Friday Ethiopia announced similar measures.	
 Prime Minister Meles Zenawi said prices of several 
imported and domestic commodities would be capped. Inflation 
is over 10 percent but retail prices of some food items, such 
as bread, have doubled in the past year. [ID:nLDE70602E]	
 On Thursday, hundreds of youths clashed with police in 
several cities in Algeria, including the capital, over food 
prices and unemployment, residents said. [ID:nCHI650813] 	
	
 (Additional reporting by CJ Kuncheria in New Delhi, Aaron 
Maasho in Addis Ababa, Erik dela Cruz in Manila, Apornrath 
Phoonphongphiphat in Bangkok, Ruma Paul in Dhaka, Rieka 
Rahadiana, Aditya Suharmoko and Telly Nathalia in Jakarta; 
Writing by Neil Fullick, Editing by Daniel Magnowski)	
 
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