With the FAO food price index rising to almost dangerous levels, reaching the highest level in February 2011, the issue has become quite worrisome, as aptly highlighted in Asian Development Banks report Global Food Price Inflation and Developing Asia.
A growing world population, rising incomes in emerging economies, and changing consumption patterns are the demand-side triggers for the prevalent high food prices.
Supply-side factors include use of food grains as biofuel, use of agricultural land for commercial purposes, and scarcity of water. Changing climatic patterns are also gradually gaining foot as a troublemaker for food production, and, consequently, food prices.
While the rising trend in global prices of some commodities was mirrored in price increases in developing Asian countries, the price rise in Pakistan for a few food crops was less than that seen globally.
For example, between June 2010 and February 2011, global rice prices rose by 16.8 percent, while in Pakistan the upsurge was about 10 percent. In the case of wheat, the local price increase was between 10-20 percent while international wheat prices rose by 99.6 percent during the eight months.
Yet, the relatively lower gain in prices of two key staple crops did not bar Pakistan from the list of countries experiencing double-digit inflation during the eight months. In fact, during the eight months since July 2010, the contribution of food to CPI inflation - 8.6 percent - was the highest in Pakistan amongst key developing Asian countries.
The report warns of FAOs concerns that declining global food inventories will continue to keep up the pressure on food prices in 2011. However, it also says that Pakistan, in particular, faces threats from social insurgency and ethnic conflicts.
Rising food prices warrant much attention because they slow down economic growth. As deduced by the Oxford Economics global model, - a global forecasting and research consultancy - if international food prices rise by about 30 percent in 2011, they can slow down GDP growth by as much as 1.5 percentage points in 2011 in some developing Asian countries.
The consultants have assumed that higher inflationary pressures stemming from rising food prices will propel policy rate hikes that will stunt economic growth.
Further, an increase in food prices also has a significant impact on poverty in a country. The case of Pakistan is no different (see table).
Short-term policy responses have focused on self-sufficiency by raising food stockpiles and providing subsidies to consumers and producers.
But if food prices continue the escalating trend, subsidising food costs will become unsustainable in the long run. Therefore, steps to augment food supplies and raising crop yield are more pertinent for ensuring long-term food security.
While measures such as tax reductions, food subsidies and food aid are practiced by Pakistani authorities, efforts for stimulating production are nearly non-existent. For example, the yield of wheat in Pakistan is below the world average, which is close to 3 tons per hectare.
R&D-induced enhancement in productivity, improvement in farming techniques and development of new crop varieties is much needed as farming conditions become even more arduous.
At the same time, especially in the case of Pakistan, inefficiencies arising from post-harvest losses due to poor storage and transport facilities need also be addressed.
Efforts for food security should be more sustainable and long-term rather than dealing with merely circumstantial shortfalls.
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Change in % of poor if food prices rise by:
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10% 20% 30%
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Pakistan 2.2 4.5 6.7
India - rural 2.9 5.8 8.8
India - urban 2.1 4.3 6.4
Sri Lanka 1.2 2.4 3.6
Bangladesh 2.5 5.0 7.5
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Source: ADB
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