Asia`s food demand to rise 4% per yr

While a rise in food prices could pose challenges to Asian governments prompting them to rely on further trade restrictions, investors might reap benefits from taking exposure to farm investment-related companies, financial services provider Credit Suisse said in a report.

"We estimate that agri-consumption in the region has grown at around 4 per cent CAGR in the last 15 years versus agricultural growth of 3.7 per cent...The food demand in Asia is expected to rise at 3.7-3.8 per cent every year," Credit Suisse's Principal Head of Research, Nilesh Jasani said.

 

A steep rise in food and essential commodities prices had forced India's policy-makers to adopt a host of fiscal measures to hold back spiralling inflation, which rose to 8.24 per cent for the week ended May 24.

On the monetary side also, the Reserve Bank of India, has recently resorted to tight measures such as effecting a 0.75 per cent hike in Cash Reserve Ratio (CRR).

"We expect rising consumer subsidies and more state procurement, higher trade protections and other inventory boosting efforts in the coming few years if aggregate food prices continue to rise," Jasani said.

Although ensuring food availability will be the short-term priority of the Asian governments, they are expected to make efforts to achieve food self-sufficiency through better yields in the longer term, the report said.

Besides, the governments in the region are likely to increase subsidisation of food products, putting pressure on fiscal deficits, it said.

At present, food accounts for a third of Asian personal expenditure, 15 per cent of the GDP and the livelihood of 55 per cent of the region's population, the report said.

"The importance of food economics cannot be underestimated...The high price of rice, even after it eases, could soon emerge in another market. This is because food demand and supply are relatively inelastic in aggregate, but elastic for individual products," the report said.

The report also said that incomes of nearly 170 crore Asians depending on agriculture could double by 2015, giving rise to a new kind of consumption wave.