With late and low monsoon in South Asia and droughts in major food producing and exporting countries, there are worrying sings that food prices might escalate in the coming months. The FAO Food Price Index averaged 213 points in July 2012, up 12 points from June. Though this is still less than the peak of 238 points reached in February 2011, the point is that overall food prices have started to increase again due to upward price pressures coming from grain, sugar and oil/fats prices. This has come amidst disappointing news about monsoon rains, and floods and droughts in major grain producing nations. South Asia will get particularly affected by this as festival season, when demand for daily consumed food items is higher than normal times, is just around the corner in India, Nepal and other countries in the region.
In its August food price update, the FAO stated that the adverse maize and corn production prospects in the US due to droughts and setback in wheat production in Russia, Kazakhstan, and the Ukraine (which accounts for nearly a quarter of global wheat export) amidst projected sharp rise in demand from livestock sector are driving prices upward. Furthermore, untimely rains in Brazil, the largest sugar exporter in the world, have raised concerns about sugarcane production and its prices in the coming months.
In South Asia, India, which is also the largest producer and exporter of food items, had 21 percent less rainfall than average. The Indian government is considering releasing grains stored in government warehouses around the country. In Nepal, agriculture production is projected to be lower than last year’s due to late and low monsoon and the shortage of fertilizers during peak planting season. Other countries in the region also are one way or the other affected by late monsoon, floods and droughts this year. Consequently, the prospects of high food prices are real and will impact food security situation in the region.
Keeping in mind the impending rise in food prices during and after the festival season, South Asian nations need to be prepared to take actions both at national as well regional level. First, emergency release from stock should be the priority to stabilize prices. Second, market imperfections arising from rigging of prices by middlemen or cartels should be monitored. Third, building crucial agriculture infrastructure such as irrigation and roads for market access also helps as only about one-fifth to two-fifth of farmers are “significant participants” in agriculture markets. Fourth, targeted food subsidies and social protection programs should be designed and implemented well in advance. Fifth, large grain producing and exporting nations like India should refrain from export bans as the other countries in the region are net food importers.
Additionally, realizing the destabilizing impact of droughts on global grain production and contribution to keeping prices high since 2007, in a recent report the FAO highlighted the “need for to transform the way water is used- and wasted- throughout the entire food chain”. Conserving water by using it more “sustainably and intelligently”—such as modernization of irrigation, better storage of rainwater at farm level, recycling and re-using, pollution control, and substitution and reduction of food waste— will not only help boost food production and stocks, but also is an important climate change adaptation strategy. As 75 percent of South Asia’s poor people live in rural areas and depend on rain-fed agriculture, changing the way water is used in agriculture is crucial for supporting livelihoods, sustainably boosting production and controlling food prices. Globally, one-third of food for human consumption is either lost or wasted.
South Asian governments need to closely monitor the prospects for rapidly spiraling food prices and implement appropriate remedial measures as and when required. Else, it will once again push thousands of people below the poverty line, increase vulnerability and heighten food insecurity.
Also, see Trade & Development Monitor, August 2012.