Infrastructure investment tipped to beat food crises
More investment in infrastructure, rather than export bans, should be the solution to looming food crises in emerging markets, say analysts.
'If one really wants to balance demand and supply of food, one should not only invest in seeds and fertilisers and bet on consumption patterns, but also invest in infrastructure such as food processing and storage facilities,' said Ralf Oberbannscheidt, managing director and head of agribusiness at fund manager Deutsche Asset Management. 'This is especially true in emerging markets.'
He cited the export ban on wheat imposed by the Indian government in 2007, which pushed up global prices because the country was the second-biggest producer of the grain.
That ban has resulted in a stockpile of over 65 million tonnes as of this month - more than twice India's reserve needs - with the government admitting crops and fresh produce are going to waste because there is nowhere to store them.
Some 40 per cent of fruit and vegetable harvests have gone bad because the country lacks the necessary storage and transport infrastructure, official figures show.
The government is drafting new legislation on food security and revising the export ban on wheat and rice.
'India needs more infrastructure,' Oberbannscheidt said. 'It is not technologically difficult to build storehouses, to pave roads, and to build processing plants.
'But someone needs to do something and the government has realised this and is putting in place the policies, expertise and foreign investment. It is a good and proactive step.'
Asian countries had strong balance sheets and their governments could finance food subsidies amid high inflation, he said. But measures should be short-term, he said, adding there was a balance to be met in subsidising food and offering enough incentives for the industry to improve.
Raymond Renfro, lead natural resources economist with Asia Development Bank's East Asia department, said China was actively seeking ties with Asian and African countries in agriculture development.
'The PRC government is promoting food security through working with local farmers, communities, private enterprises, local governments and international development partners, like the ADB,' Renfro said.
'The government has established good co-operation with Asian and African countries, and has helped develop demonstration centres in those countries and training programmes.
'Some PRC state-owned banks have provided loans for agricultural companies to farm African countries,' he said.
Earlier this year, Asean set up a food security framework, under which its 10 member states would commit to an emergency regional rice reserve system. Details of the system have yet to be confirmed.
Satish Lele, vice-president of consultancy Frost & Sullivan Asia Pacific, said Asean co-operation with both China and India on food production and distribution could have a big impact on the region given the two countries' huge populations and economies.