Bigger food crisis can be averted if Asia remembers not to panic
The world’s food problem is already severe as prices jump and protectionism flares but there is a good chance governments can stop it from getting way worse if they heed a lesson from the crisis in 2008: Don’t panic.
With a gauge of global prices already at a record following Russia’s invasion of Ukraine, a spate of nations have moved to curb exports in crops from wheat and sugar to cooking oils, exacerbating security risks for the rest of the world. Bad weather is a concern, too. Still, whole wheat, corn and soy have soared, rice, a staple for more than 3 billion people, has so far been more stable. If nations do not panic or start hoarding, they can stop the current crisis from becoming a rerun of the one in 2008, when rice prices soared to put the region’s food security at serious risk, according to Peter Timmer, Professor Emeritus at Harvard University, who has studied food security for decades. “The 2008 lesson is: Do not spook the market,” says Timmer, who worked with Asian governments on their policy responses during that food crisis. “Be careful whatever you do on rice imports, on exports, on controls.”
The stakes could not be higher. Policy makers from the US to China are grappling with elevated inflation and slowing growth, while consumers face fast-rising costs of living and hunger is spreading. Rice — about 90% of which is produced and consumed in Asia — is one of the most important crops.
The 2008 crisis provides critical lessons as it underscores how government-imposed trade shocks can supercharge commodity prices. Rice’s surge back then was mainly because of bans on exports by major producers, notably India and Vietnam, due to domestic shortages and rising prices. That sparked panic buying in other countries, especially the Philippines, creating a ripple effect.
There are some similarities today. Rising energy prices, bad weather, and export bans contributed to the current upswing in food prices, just as they did back then, although the war in Ukraine adds a critical new dimension. This year as agricultural prices jumped, several governments have moved to safeguard their own supplies: Indonesia restricted palm oil exports, Malaysia banned chicken flows, while India is limiting both wheat and sugar sales.
While there are concerns that rice could be next in line, given that it is absolutely critical to food security and political stability in Asia, there are also differences from 2008. Timmer says countries have both diversified their eating habits and built up huge buffer stockpiles in a bid to prevent price shocks.