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Asia’s urban poor worst-hit by food price volatility

SINGAPORE — Asia’s urban poor are worst-hit by spiking food prices, according to a report released Tuesday by a regional think tank which tipped rising volatility in commodity prices.

Impoverished families in the region’s teeming cities are more vulnerable than rural folk to swings in food costs, according to the Pacific Economic Cooperation Council (PECC).

Food price increases’ greatest impact is on the urban poor who are more dependent on a money-based economy and spend a large share of the household budget on food,” said Walter Armbruster from the PECC taskforce which authored the report.

“The rural poor may have greater access to food through family relationships or the capacity to produce their own food.”

The report, released at the Asia-Pacific Economic Cooperation (APEC) forum in Singapore, said that food price volatility was set to worsen as trade in commodities became more interlinked with other markets.

“Real agricultural prices increased in the 2000s, as they became more closely linked to non-agricultural commodity and energy prices. Some of these price increases — such as fertilizer and transportation costs — changed the cost structure of agriculture,” he said.

Protectionist policies by major agricultural producers coupled with “the psychology of scarcity and propensity to hoard” were other factors behind volatility, Armbruster said.

“Policy intervention played a significant role in raising agricultural commodity prices, especially in the case of rice,” he said.

Describing swings in rice prices as “the single most important phenomena affecting the region’s food system in recent years,” Armbruster said that a major factor was slim trading volumes in the grain.

An important lesson from this volatility was that the rice market intervention, if left unchecked, can be more destructive than economic events,” he said.

Commodities prices soared before the global downturn struck last year, causing serious concerns over food prices and food security.

The UN food agency said this week that although prices have fallen significantly since their peaks a couple of years ago, wheat and maize prices are rising and rice export prices are still way above pre-crisis levels.

Armbruster urged regional nations to adhere to the APEC Open Food System of liberalising trade and developing rural regions in agricultural economies in order to cushion the impact of food price volatility.

“We may be entering a higher volatility future in commodities prices, but there are some things that can offset that volatility,” he said.

Source – Nov. 11, 2009, AFP

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