Record high prices of corn and soybean brought on by the worst U.S. drought in 56 years may be triggering a sense of de ja vu for Asia concerned about a repeat of the food scare in 2008, but most economists are downplaying those fears, for now.
The U.S. may account for a third of global corn production, and soybeans are hugely important because, along with corn, it goes into the feed for Asian farm animals such as cattle and pigs, but the two grains do not make up a huge component of headline inflation numbers in the region, economists say.
“How worried should we be? Not overly,” Frederic Neumann, Co-Head of Asian Economics Research at HSBC said in a report on Friday. “Sure, Asia has structural inflation problems. But soy isn’t one of them. And neither is corn nor U.S. wheat. Oil and rice matter much more for food inflation in Asia.”
Rice carries a large weight in Asian CPIbaskets, especially in Southeast Asia, but prices appear to be under control and nowhere close to levels seen in 2008, when the benchmark Thai rice hit $1,000 a metric ton, 40 percent higher than current levels, Neumann said. And oil – which determines the cost of transportation and production – has dropped “sharply” in recent months, he noted, adding that prices are unlikely to return to previous highs.
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