Days of cheap food in Asia over, says ADB

Production of biofuels in Europe and the United States, frequently supported by government subsidies, have also driven up the prices of agricultural commodities such as corn, forcing increased use of substitutes like soybean and palm oil.

The ADB said public hoarding, through export bans and restrictions in China, Thailand and Vietnam, and panic-buying in the Philippines, had contributed to the price pressures.

Because only 10 percent of total rice production is traded internationally, any news of supply disruptions, especially in big producer countries such as Vietnam and Thailand, quickly set off price spikes, the bank said.

Strong economic growth is likely to keep demand on the rise, while biofuel production is expected to grow.

Meanwhile,the ADB on Tuesday cut its 2009 growth forecast for the region’s developing economies to 7.6 percent, citing tighter credit and soaring food and energy costs.

The bank trimmed its previous growth forecast from April of 7.8 percent, and said actual growth could be lower if either inflation or the US economic slowdown were worse than expected.

It maintained the 2008 growth forecast for the region at 7.6 percent, with China set to dip below five years of double-digit growth to 9.9 percent in 2008 and 9.7 percent next year.

However, it sharply raised its 2008 inflation forecast for East Asia to 6.3 percent this year, from 5.1 percent in its April outlook. Inflation averaged 3.9 percent in East Asia last year.