Factbox: Asia grapples with rising food prices

SINGAPORE (Reuters) - Record high food prices are moving to the top of the agenda for many Asian policymakers as the prospect of higher inflation in 2011 poses a major threat to the region’s strong revival from the global financial crisis.

The United Nations’ food agency (FAO) said on Wednesday that food prices hit a record high last month, moving beyond the levels that prompted riots in 2008 in countries as far afield as Egypt, Cameroon and Haiti.

Following are some of the measures taken by governments in Asia to tame rising food prices.


* China’s Banking Regulatory Commission has called on banks to offer more financial support to boost farm output.

* The nation has sold large volumes of corn, wheat, soy, rapeseed oil, sugar and rice from state reserves to ease tight supplies and cool prices.

* The State Council threatened in November to impose price controls to tame inflation, and cited grains, oils, sugar and cotton as the markets it wanted to stabilize. The government told several flour companies not to hike prices and increased supplies of wheat into the market.

* Authorities ordered four edible oil suppliers -- COFCO Ltd; Yihai Kerry, which is owned by Wilmar International; China Textile, and Jiusan -- not to raise prices to retailers for four months, a newspaper report said on December 2.

* The government plans to increase farm subsidies and implement projects to grow genetically-modified crops to try and maintain self-sufficiency in grains.

* The commerce minister has said the government will boost imports of agriculture products of which China is short and boost state reserves of products, including sugar and meat.

* The three main commodity exchanges -- in Shanghai,Dalian and Zhengzhou -- have raised trading margins to force traders to back their positions with more cash as part of efforts to limit speculation. They also widened trading bands, allowing prices to fluctuate more without hitting the headline-grabbing up or down limits.

* Sugar and cotton dealers say authorities have also threatened to close trading in certain agricultural commodity contracts if there was excessive price speculation.


* India’s central bank could adopt a tighter monetary policy and hike interest rate as it did six times last year to tame high inflation in part fueled by food prices.

* The government regularly releases grains from its reserves to tame food prices. Last month, the government freed up 5 million tonnes of wheat and rice for sale to states and bulk consumers as part of efforts to curb rising food prices.

* Despite having huge stockpiles of grains, officials say India is not planning to lift export curbs on wheat and rice in 2011.

* The country is expected to continue with duty-free imports of crude vegetable oils. India has no plans to impose import tax on edible oils, a government source said this week, as any such move would be inflationary. Indian trade bodies want the government to impose a 10-17 percent import tax on oils to ensure higher prices for local producers on prospects of a good domestic oilseed crop.


* Bank Indonesia will tighten monetary policy if core inflation (which was 4.3 percent y/y in Dec) nears 5 percent, but might do so through lifting bank reserve requirements following China. It has kept its rates on hold at a record low 6.5 percent despite inflation levels, and sees a rate hike as a policy of last resort because it is worried about attracting further capital inflows.

* The trade minister has said the government would continue this year to subsidize a 10 percent VAT tax levied on palm oil refiners, after regional palm oil prices climbed to a near two-year high this week.

* The government already moved in recent months to secure 1.3 million tonnes of rice from Thailand and Vietnam for delivery before the first local harvest in February, after not buying at all in 2009 and 2008. It has said if local production is higher no further imports would be needed. Still, further imports might come after the harvest in June if stocks are low.

* The president called on households on Jan 6 to plant their own food to help head off inflationary pressures.


* The country has been taking measures on both the central and provincial levels to prevent food price rise, such as tight control of rice exports, stockpiling food as well as fighting gold and dollar speculation, which indirectly affect food prices. * A government decree in November urged the relevant authority to tightly control rice exports to ensure sufficient supply on domestic market and avoid food price surge in the period before Tet, or the Lunar New Year festival, starts from late January.

* Companies, mostly state-owned, have been building stocks of food products to serve consumers in major cities following a government call last month on ensuring sufficient supply of food, foodstuff, fuel and oil products. * The government also stepped up a campaign to combat fake goods and smuggling, especially in food products, to ensure smooth supply of good products.

* The government of Can Tho city in the Mekong Delta rice basket granted 30 billion dong ($1.5 million) in interest-free loans to five local companies to stockpile rice, sugar, cooking oil, milk and processed foodstuff. * The central bank has been coordinating with the provincial governments to prevent the speculation of gold and dollar, the price surge of which also has had a chain effect on food prices.


* The Thai government fixes the retail price of about 30 food items. It has ordered producers of major consumer products not to raise prices of goods, including many food items, in a bid to hold down inflation.

* Such instructions were repeatedly rolled over in 2010 and the latest order effectively freezes some prices until the end of March.

* On Jan 6, the government said it would authorize the import of 30,000 tonnes of crude palm oil in January to tackle a shortage, although the Commerce Ministry has blamed hoarding by profiteers for exacerbating the normal seasonal shortfall in supply. Imports of palm oil are not uncommon, although none were required in 2009 and 2010.


* In a bid to counter increased hoarding and tight supplies, Malaysia, the world’s No.2 palm oil producer, has ordered firms to boost subsidized cooking oil supplies by 20 percent to 84,000 tonnes in January, local media reported this week.

Compiled by Naveen Thukral and Niluksi Koswanage; Editing by Simon Webb and Neil Fullick