INTERVIEW
Food inflation could put 100M at risk -- World Bank
By Daniel Bases
Reuters
First Posted 09:30:00 04/11/2008
WASHINGTON -- A doubling of food prices in the last three years could potentially put 100 million people in low income countries deeper into poverty and raise the global poverty rate as much as 3.0 to 5.0 percentage points, a senior World Bank official said on Thursday.
"When it doesn't include substitution and social assistance programs, poverty rates could potentially, according to preliminary data, show poverty rates rising 3.0 to 5.0 percentage points," Marcelo Giugale, director of the World Bank's poverty reduction and economic management for the Latin America and Caribbean region, told Reuters.
"We are still in the preliminary analysis of all of this," he said.
Substitution represents the use of agricultural products and food grown locally that are not traded internationally and therefore potentially cheaper to consume, he explained.
From 2005 through 2007, world wheat prices rose 70 percent, corn gained 80 percent and dairy prices nearly doubled, up 90 percent.
"For the studies I have seen, it is about 100 million people across the world," who face deeper poverty Giugale said.
Giugale said there were five factors that contributed to a "perfect storm" for food prices. They are:
* The protection and subsidization of the production of grains for biofuels "which has taken the production of the market for feeding into the market for energy.”
* The increased costs of diesel fuel and fertilizer which are used to produce the food.
* Bad weather in traditionally big production areas. One example given was Australia, parts of which suffered the worst drought in 100 years.
* A strong indication that tastes in Asia are shifting toward greater consumption of proteins from meat and poultry which requires more grains to help produce.
* A suspicion that in the last six months as central banks have increased the levels of cash available to banks to stave off a credit crisis, the money found its way into food-related financial futures.
Social assistance programs that were designed to target the recipients of poverty aid will be tested by the expected increase in poverty rates due to higher food prices.
"We have a good idea of which countries that invested in social assistance programs that are a lot smarter than in the past. Mexico, Brazil, Colombia, Guatemala, Peru," Giugale said.
"It is very interesting because we will now test whether those systems work. Now we see how robust they are and if they do, this will shed light on every other country that does not have this kind of assistance and they begin to think about it," he said. (Editing by Richard Chang)
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