Philippines Found Still Better Off Amid Rising Food Prices

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Increase in price of staples has been slower in the Philippines, Thailand and Malaysia than in some of their East Asian peers, the World Bank’s Food Price Watch for this month showed.

This, even as the bank’s Food Price Index has kept close to its 2008 peak, remaining 36% above the year-ago level, the report said.

Released every other month, the World Bank’s Food Price Watch monitored single-digit food inflation rates in the Philippines, Thailand and Malaysia as of February, compared to highs of 17%, 15% and 11% for Vietnam, Indonesia and China, respectively.

The latest available National Statistics Office data show that annual inflation for “the national food alone index” picked up to 4.5% in March from 4.3% in February, even as the rate for all items remained at 4.3% in those months.

The World Bank report identified the key staples whose world prices have remained “significantly higher” in March than a year ago as maize (74%), wheat (69%), soybeans (36%) and sugar (21%). At the same time, it noted that global rice prices have remained stable.

The report cited drivers of rising food prices as:

* crude oil prices, which had spiked 21% in the first quarter due to civil unrest in the Middle East;
* “severe weather events in key grain exporters” like the Russian Federation, Kazakhstan, Canada, Australia and Argentina in the second half of last year;
* the broad-based rise in agricultural commodity prices last year; and
* the link between higher oil prices and biofuels.

The report noted that a 10% increase in crude oil prices “is associated with” a 2.7% rise in its Food Price Index.

It explained that higher crude oil prices drive up:

* the cost of farm inputs like fertilizer and irrigation;
* the cost of transporting produce from farms to markets; and
* the use of food products like corn, vegetable oil and sugar in the production of biofuels.

Rising food prices, in turn, are driving more people into poverty.

The report noted that an additional 44 million people fell below the $1.25 poverty line “as a result of higher food prices” since June last year. It cited World Bank simulations as showing that a further 10% increase in the Food Price Index could drive an additional 10 million people into poverty, while a 30% increase could add 34 million others.

“More poor people are suffering and more people could become poor because of high and volatile food prices,” World Bank President Robert B. Zoellick said in a statement on the report.

“We have to put food first and protect the poor and vulnerable, who spend most of their money on food.”

A bar graph, comparing food share in household expenditure of the poorest 10% of the population of 10 developing countries, showed those in the Kyrgyz Republic, Sri Lanka and Indonesia allocating a greater share than those in the Philippines, while those in Vietnam, Togo, India, Peru, Yemen and Cameroon earmarking less. Neither exact percentages nor amounts were immediately available.

To help the poor cope with rising food prices, the report prescribed:

* social assistance and nutritional programs to prevent further health deterioration among affected families;
* more investments to improve agricultural yield through environmentally sustainable means; and
* policies that reduce pressures on already-tight global food markets, including relaxing national biofuel mandates and removing export restrictions on grains.

Amid frequent fuel price increases in the Philippines, the government is now considering plans to expand to farmers and fisherfolk a fuel assistance program that now covers only qualified public jeepney and tricyle operators.

Source: Business World Online