Public Administration News

Asia Should Brace for Food Inflation

Source:	Bloomberg
Source Date:	Saturday, December 25, 2010
Created:	Dec 28, 2010

INCREASED demand for food in Asia will help to boost prices next year, fueling faster consumer inflation, according to Yougesh Khatri at Nomura Holdings Inc., who flagged rising costs as a “key theme” for 2011. Costlier food was likely to hit Asia hard as edible goods accounted for “a fairly large chunk” of the baskets that governments use to calculate the pace of price changes, said Khatri, a Singapore-based senior economist. “That is likely to show up as particularly severely impacting CPI next year,’ Khatri said in an interview on Bloomberg Television. Khatri’s comments add to forecasts from Deutsche Bank AG and Rabobank Groep NV that farm-goods prices may rally in 2011. Food inflation in India gained to a six-week high this month. China needs to be prepared for a long fight against inflation, the National Development and Reform Commission has said. Inflationary pressures in Asia were coming both from the inflows of capital to the region and rising food prices, Khatri said, without identifying specific foodstuffs. Inflation is “our key theme for next year,” he said. The Food and Agriculture Organization’s Food Price Index of 55 commodities surged for a fifth month in November to the highest level in more than two years. Soybeans rallied to $13.6575 a bushel Thursday, a 28-month high, on increased demand from China. Palm oil has surged 37 percent in 2010. Farm commodity prices including corn will extend rallies next year driven by increased demand and higher energy costs, according to a report from Rabobank this week. A lot of agricultural commodities including corn, soybeans and wheat were “still cheap” even after recent rallies and may extended gains, Deutsche Bank’s Michael Lewis said last month.