UN Report: Asia Faces Jump in Food Costs

A vendor, right, sells cooked rice at a roadside store in Phnom Penh, Cambodia, Thursday, March 27, 2008. Cambodia's government appealed for calm Thursday as it rushed out a series of economic measures to address soaring food prices. (AP Photo/Heng Sinith)

Thursday, March 27, 2008
By JOE McDONALD

BEIJING (AP) -- Asia faces a sharp rise in food costs, due partly to surging demand for crops used in biofuels, and governments should do more to shield the region's poor from economic shocks, a U.N. commission said Thursday.

Economic growth in the region will slow as the U.S. credit crisis hurts demand for exports, but a robust expansion in China and India should help Asia avoid a major slump, the U.N. Economic and Social Commission for Asia and the Pacific said in a report.

"Rapidly rising food prices will be the key challenge in the coming year," Shuvojit Banerjee, an economist for the commission, said at a Beijing news conference. "With the march towards biofuels apparently unstoppable, the region has to prepare for sustained inflation through higher food prices."

Economic output for the sprawling region, which stretches from Japan to Georgia, should grow by 7.7 percent, down from 8.2 percent in 2007, the commission said. It said inflation should ease to 4.6 percent, down from 5.1 percent last year, though price rises in countries such as China will be higher.

In China, food costs in February were up 23.3 percent from the same month last year, driven by a 63.4 percent jump in the price of pork and a 46 percent rise for vegetables.

Across the region, price rises are driven in part by surging demand for food crops to make biofuels, such as sugarcane used for ethanol, the commission said.

"We do view biofuels as quite a worry for food production in the region," Banerjee said.

China has banned use of food crops for fuel and has imposed curbs on grain exports to increase domestic supplies and cool inflation.

Banerjee appealed to other governments to follow Beijing's example.

"We would advise governments to be very cautious about biofuels" until the region can take advantage of technology being developed to make fuel from non-food crops, he said.

On Wednesday, Indian Finance Minister P. Chidambaram said the use of food crops for biofuels is hurting the poor and called it "a sign of lopsided priorities of certain countries."

"It is outrageous and it must be condemned," he said in a lecture in Singapore.

The U.N. report said rising food costs hurt the poor much more than higher oil prices because they spend a much bigger share of their incomes to feed their families. In the Philippines, for example, 50 percent of consumer spending is for food versus 7 percent for energy.

The commission's growth forecast is in line with those of economists who expect a U.S. slowdown to depress Asia's rate of expansion but say rising demand from the region's own consumers, especially in China, should help to fill the gap.

The full impact of the credit crisis triggered by a spike in defaults on subprime mortgages in the United States is still to be seen, Banerjee said.

"We cannot rule out a significant slowdown in the U.S. and further financial turmoil," he said.

However, he said, "The good news is that China and India, the region's growth locomotives, are expected to grow at a robust pace, boosting the rest of the region."

China has set a growth target of 8 percent this year, down from last year's 11.4 percent.

The region, and especially higher-technology exporters such as South Korea and Taiwan, could suffer a bigger hit if the U.S. economy slows further and the weak dollar falls against Asian currencies, Banerjee said.

"Countries in the region will face twin blows - lower demand and loss of competitiveness," he said. "In a worst case scenario of a U.S. downturn and a depreciation of the dollar, the impact would be harsh."

The commission appealed to Asian governments to do more to protect the poor by expanding social welfare and health care programs.

Banerjee cited the examples of Thailand's universal medical care system and a food-for-work program in Bangladesh.

"Extending protection to the majority of citizens is a critical priority," he said. "This means that benefits should be ensured for the most vulnerable workers - the young, women, less-educated and less-experienced."

The commission appealed for more efforts to improve productivity of Asian farming, where it said government neglect has contributed to keeping hundreds of millions of people in poverty. Agriculture employs 60 percent of Asia's workers, according to the commission.

"We find persistent poverty and widening economic inequalities due to the neglect of agriculture," Banerjee said. "Improving agricultural productivity would have a profound impact on poverty."

Planting seeds of biofuel where little else grows

Monday, October 29, 2007
By Sonia Kolesnikov-Jessop
International Herald Tribune (France)

SINGAPORE: Until recently, Jatropha Curcas, a tall bush with highly toxic fruit and bark, was mainly used as a hedge plant to keep livestock away from crops.

But amid soaring prices for traditional biofuel feedstock, including palm oil, the nuts from the perennial bush are now being eyed as a possible sustainable alternative throughout South and Southeast Asia.

Several governments in the region have announced plans for massive planting programs. The Indian government is targeting 13.5 million hectares, or 33.5 million acres, for jatropha cultivation by 2012; in the Philippines, a British firm, NRG Chemical Engineering, has set up a joint venture with the state-owned Philippine National Oil to construct a biodiesel refinery and two ethanol distilleries.

NRG Chemical says that it will invest $600 million in jatropha plantations that will cover over a million hectares, mainly on the islands of Palawan and Mindanao.

Even Myanmar is joining the fray, with the director general of Myanmar's energy planning department being quoted over the summer saying that the country hopes to have 2.8 million hectares of jatropha plantations by the end of next year. The country has already planted 650,000 hectares, according to news reports.

"It's one of the biofuel crops that offer a genuine hope of producing an environmentally neutral fuel," said Krystof Obidzinski, a research fellow at the Center for International Forestry Research in Indonesia. "Environmentally it's definitely better than palm oil because you can plant it on dry soil and barren areas and it will do well. But the problem is you need a vast area to produce a substantial amount of oil because the yield of jatropha oil per hectare is far, far, far smaller than the yield from palm oil."

There is no technical challenge in processing jatropha into biodiesel, said Graham Prince, a spokesman for D1 Oils, a British biodiesel producer. The real commercial challenge is to raise the yield.

Oil palm can yield as much as five metric tons of oil per hectare while, under the best conditions, uncultivated jatropha will yield on average only 1.7 tons, Prince said.

On the other hand, he said, "It's still better than rapeseed yields in Europe, at 1.5 tons per hectare and soy, which only yields 0.5 tons."

D1 says that it has identified a variety of the bush from West Africa that, under cultivated conditions, could yield up to 2.7 tons per hectare. "We are at the early stage of commercial development," Prince said. "The first mass multiplication of the seedlings of that higher-yielding variety is being developed now. They will be planted between now and end-2008 on about 50,000 hectares, mainly in northeast India."

The plants mature and start to fruit about two years after planting. D1 plans to harvest and crush the seeds locally and transport the oil abroad.

One of the big advantages of jatropha is that it grows in semi-arid conditions and can be planted on otherwise unproductive land.

"As such, it's an additional revenue for farmers," said Peter Cheng, chief executive of Van Der Horst Biodiesel, a Singapore company that has invested in small pilot plantations of 1,000 hectares or less in China and Cambodia. Van der Horst is now negotiating for an additional 20,000 hectares in Cambodia, 10,000 hectares in Vietnam and 25,000 hectares on the Indonesian island of Seram. The company's business plan calls for it to build a biodiesel plant in Singapore, with a 200,000-ton annual production capacity, to process jatropha from its plantations in the region.

For all the buzz around the seeds, Prince warns that governments need to proceed cautiously. "You've got to make sure you're planting this in the right area," he said.

"There is no point of having a jatropha bonanza if people start chopping down rainforest to plant, or farmers plant it in areas that are too dry."

The bush needs between 600 milliliters, or 37 cubic inches, and 1,500 milliliters a year of rainfall - ideally 1,000 milliliters, he said. "If it's planted in areas that are too wet or too dry, they might not get any yield at all."

Another problem is that, like coffee, wild jatropha produces fruit and flowers simultaneously. Harvesting therefore needs to be done by hand, but large-scale plantations will ultimately require mechanization.

"We won't be able to develop mechanization until we've done sufficient breeding on jatropha to remove its characteristic of fruiting and flowering at the same time," Prince said.