Rising Economic Growth in China, India Contributes to Food 'Inflation'

Dramatic economic growth in China and India has lifted millions of their citizens out of poverty and improved living standards. Such success, however, has some far-reaching consequences. The amount of food needed to meet the needs of wealthier populations contributes to volatile global agricultural prices.

The streets of Hong Kong's outdoor food markets bustle as shoppers look for fresh produce and meat. Vegetables and fruit are piled on tables, and pork and poultry hang from sharp hooks along storefronts.

Wong Loi has sold pork and poultry for more than 20 years.

She says that earlier this year, it became difficult to make a decent week's living. Wong was among many caught off guard in late May by a steep increase in prices for pork imported from China.

Pork supplies dwindled after an outbreak of blue ear disease, a virus that can be deadly in pigs. But the increase in the cost of pork, a staple of the Chinese diet, was also due to rising demand from China's expanding middle class.

Rising economic growth in some developing nations, particularly China and India, has brought about massive change in the global food market. Both countries have more than a billion people and in both, hundreds of millions have been lifted out of poverty in the past few decades. That means they now can afford to eat not just more food, but more imported food.

Mark Thirlwell is the director of the International Economy Program at the Lowy Institute for International Policy in Sydney. He says China and India's economic growth has changed the nature of food demand, because their wealthier populations are shifting away from traditional meals based on rice and local vegetables.

"In China we are seeing increases in meat and dairy products, which has direct implications for those markets," said Thirlwell. "But also it has implications for the inputs into the meat and dairy, so grains for example."

Figures released by the International Grains Council show that this year, world grain stocks are expected to fall to their lowest levels in 30 years. World export prices of wheat soared to record prices, up about 25 percent alone in September.

The result is higher prices in much of the world. In August, China's inflation rate hit its highest level in more than a decade, with food prices up more than 18 percent from a year earlier. Officials in India are concerned about costlier food, despite its relatively stable inflation rate.

In the United States, food price inflation is more than four percent this year - twice the overall inflation rate. U.S. milk prices are up 18 percent since the start of the year, while eggs cost 35 percent more than they did a year ago.

Thirlwell says many factors cause the price increases.

"We've had a really bad weather events, including here in Australia, of course, with the drought, but also Canada has been affected, things have happened in Europe in the Black Sea Basin," he added. "And that's meant that at the same time that you've had increase in demand in key markets such as wheat for example, supply has been constricted."

Changing weather patterns, which affect crop yields, and global population growth also push up food prices. In addition, higher oil prices make it more expensive to plow fields and ship crops to market.

Some experts say the new international focus on replacing oil with bio-fuels, such as ethanol, is an extra strain on food crops. Penny Ferguson is a spokeswoman for the United Nations World Food Program in Nairobi. She says governments are struggling to decide how much land to devote to growing crops such as sugar and corn that produce bio-fuel.

"If land that is normally allocated to the production of crops for food is then allocated to the production of crops for bio-fuels, this is going to affect the poorest people in the world, who depend for much on grains and other commodities," said Ferguson.

The WFP estimates there are 800 million malnourished people in the world, and it provides food to 90 million. Ferguson says if world grain stocks continue to shrink, it is easy to see who will suffer first.

"If the same amount of money doesn't supply enough food for these people, we'll see an increase in the number of people whose needs we cannot meet," she continued.

The question facing many governments is what can be done to ensure their citizens can eat.

There are many ways to get more food to people. Thirlwell says India is an example of a country that could improve supply by improving everything from roads to warehouses.

"There's some stats around that suggest that for example because of inadequate warehousing and the inability to shift food from where it's grown to its market and distribution systems, that you can get up to 30 percent of India produce is just wasted," he said.

Experts say it is possible to increase farm productivity with better irrigation, improved crop placement and the careful use of fertilizer.

They also say that governments must make sure that farmers have access to credit - to buy seed, equipment and livestock, and that they use the best farming techniques.

Some economists also say any food shortages may be short-lived, because next year farmers will boost production to take advantage of higher prices.

For Thirlwell and other experts, the spike in farm prices is merely a signal for countries to step up productivity and improve the supply infrastructure from irrigation to refrigeration. They say that as governments and farmers adapt to higher costs and increasing demand, supplies will increase and eventually, prices will even out. - VOA News

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