Worrying rise in rice prices

(Patria) - Rice prices have reached their highest level in almost twelve years, after India's ban on rice exports and unfavorable weather conditions reduced the production and supply of the staple food in Asia, the UN Food Agency announced.

- The global rice price is particularly worrying. What seems clear is that food price volatility will continue in the coming months - Qingfeng Zhang, a senior director from the Asian Development Bank, told CNBC.

Apart from India, food inflation in Asia has been relatively moderate so far this year.

However, a combination of factors is fueling fears that a shortage of rice supplies could signal a return to a widespread rise in prices of other food products in Asia.

Among these are extreme weather caused by global warming, with the appearance of El Niño for the first time in seven years, Russia's withdrawal from the Black Sea grain initiative, and protectionist food policies in the form of trade restrictions.

El Niño is a weather phenomenon caused by warming water temperatures in the eastern and central equatorial Pacific Ocean, which brings wild weather conditions that have caused disaster globally, reports SEEbiz.

At the height of the food price crisis in 2010-2012, the Asian Development Bank estimated that a 30% increase in international food prices in 2011 led to a 10% increase in rice prices in developing Asia and reduced GDP growth by 0.6 percentage points for some food-importing countries in the region.

Emphasizing how higher food prices erode purchasing power, the ADB suggested at the time that a 10% increase in domestic food prices in developing Asia would push 64.4 million people into poverty, based on a poverty line of $1.25 per day. This would mean an increase in the poverty rate from 27% to 29% at that time.

Certainly, most Asian countries will be able to withstand a supply shock of rice alone.

- Prices have definitely jumped, and this contributes to the alarm, as well as anecdotal stories of people panicking. But if you look at the overall supply and demand, Asian countries are in a position to overcome this price shock and market supply of rice - said Erica Tay, an economist at Maybank covering Thailand and China.