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Fears grow of a looming food crisis in east Asia

US drought and middle-class demand point to shortages, MICHAEL RICHARDSON writes

When Indonesia announced last week that it would suspend an unpopular import tax on soybeans for the rest of the year to restrain a sharp rise in the price, it underscored nervousness rippling through east Asia about a repetition of the global food crisis in 2007-08.

At that time, escalating food prices sparked protests and riots in nearly 50 countries, mainly developing economies in Africa, the Middle East and Asia. Since then, further food price inflation and downturns in many economies have kept food security at the forefront of government policy. The World Bank estimates that almost one billion people now struggle to get enough to eat, reversing decades of slow but steady progress in reducing hunger.

For east Asia, a new round of food price hikes would have a double impact, not just on the poor but also on a rapidly growing middle-class with high expectations of further improvements in living standards.

Unlike in 2007-2008, rice - the staple food of millions of Asians, especially the poor - is in ample supply. In fact, the impact of any new food price crisis might be hardest on the emerging and politically vocal middle-class whose appetite for meat, poultry, eggs, dairy products and farmed fish fed on grains and legumes is a major driver of the recent rise to record levels in the global prices of corn, wheat and soybeans.

Prolonged summer drought in the United States, the world's largest exporter of these commodities, lies behind the recent surge in prices. It follows dry spells that badly damaged the soybean crop in South America and the wheat crop in the Black Sea region. The US ships huge quantities of grains and soybeans to east Asian markets, including China, Japan, South Korea and Indonesia. In the latter, imported US soybeans are much cheaper than the locally-grown legumes used to make widely-eaten tempe and tofu.

However, the vast majority of east Asia's grain and legume imports goes into animal feed, following the discovery by animal nutritionists that combining one part soybean meal with four parts grain dramatically boosts the efficiency with which livestock and poultry convert grain into animal protein.

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It is possible that scattered rain across some of the US grain belt last week could spread, breaking the drought. It would come in time to prevent further falls in soybean output but too late to prevent extensive damage to the corn crop. In east Asia, China would suffer most from continued dry weather in the US as it is the world's biggest importer of soybeans.

China is forecast to import almost 60 million tonnes of soybeans in the year starting on October 1, accounting for nearly 60 per cent of the international trade in 2013.

Japan and South Korea are among the top corn importers, with China fast catching up as its dependence on food imports grows. The US Grains Council says that China could soon overtake Japan as the world's top corn importer.

The China Daily reported on July 25 that China's imports of corn, wheat and rice rose by more than 40 per cent in the first half of 2012 to almost 41 million tonnes, as resilient demand and changing diets fuelled the increase even as the country's other commodity imports shrank , pulled down by a slowing economy.

As recently as 1995, China was basically self-sufficient in soybeans. Today, imports account for 75 per cent of its soaring consumption as rising incomes, especially in the burgeoning middle-class, enable many of the country's 1.35 billion people to consume more meat, dairy products, eggs and farmed fish.

More than a quarter of the meat produced worldwide is now eaten in China, mainly pork and poultry. In 1978 when China started agricultural reforms, its meat consumption was one third that of the US. Today, China's annual meat consumption of 71 million tonnes is more than double the US figure.

Chinese chicken consumption is set to exceed 13 million tonnes this year, the first time that more chicken will be eaten in China than in the US.

Where will this voracious demand in China for high-protein food lead? Janet Larsen, research director for the Earth Policy Institute in Washington, says that if Chinese demand for meat continues to rise fast, its feed grain and soy imports would soar, taking international food prices up with them.

She points out that China's per person meat consumption is just half the amount in the US. For China to reach US per capita levels with beef it would take over 75 per cent of current world beef output. For chicken, it would require 80 per cent of global broiler production. And China is not alone. Many people in the developing world with little meat in their diets want to eat more.

Giving a preview at the weekend of a forthcoming US National Intelligence Council report on key global trends, Christopher Kojm, a NIC analyst, said that the global middle class may double to reach two billion by 2030. Many will be in Asia, an epicentre of world economic growth.

While a middle-class expansion on this scale would sharply reduce poverty, it would raise food demand by 50 per cent in the next 18 years, although the planet's population would only rise from 7.1 billion to 8.30 billion. Kojm pointed out that middle-class people want meat-rich diets, requiring more water and grain to produce. Moreover, ''nearly 50 per cent of humanity will live in water-stressed regions by 2030'' exacerbated by global warming, he said.

Kojm predicted that new technological developments could help close the gap between food demand and water shortages. Whether food can be grown more sustainably and shared more equitably to meet future demand will be a key factor shaping international food prices - and global stability.

The writer is a visiting senior research fellow at the Institute of South East Asian Studies in Singapore.