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FOOD INFLATION: STRATEGIES FOR NAVIGATING AN INCREASINGLY HUNGRY ASIA “We Accelerate Growth” May, 2011 Satish Lele Vice President
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FOOD INFLATION: STRATEGIES FOR NAVIGATING AN
INCREASINGLY HUNGRY ASIA
“We Accelerate Growth”
May, 2011
Satish LeleVice President
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Notable news
Chilli prices quadruple in Indonesia
Onion prices soar in India
“We Accelerate Growth”3
Cabbage prices hit kimchi loving S Korea
Corn hits $7.76/bushel in April
2008 and 2011
“We Accelerate Growth”4
Source: FAO
• Food prices back and over 2008 peaks
• Non energy and Metals & Minerals also at highest level
Food prices
• Asia – 3.3 billion population
• Two third of the world poor –
660 million live in Asia
“We Accelerate Growth”5
660 million live in Asia
• 10% increase in food prices
will push another 64 million
into poverty
Root causes for price rise
Fundamentals vs. speculation
Weather Currency hedge
“We Accelerate Growth”6
WeatherPopulation growthPopulation affluenceTransport costsNew demandEmbargoes
Currency hedgeSafe asset classPhysical holdingVolatile trading
Some realities
• More, and more wealthy people eat - China consumed 20 kg of meat in 1985 per person, 50 kg in 2010.
“We Accelerate Growth”7
Obesity: % of population with BMI greater than 30, older than 15
Some realities
A third of the food produced in the world
gets lost or wasted.
Loss and Waste – 1.5 billion tons
A forgotten priority?
“We Accelerate Growth”8
A forgotten priority?
• Consumers in rich countries waste
almost as much food as the entire net
food production of sub-Saharan Africa FAO report – May 2011
So how to combat food inflation?
First of all, is it possible to combat food inflation?
“We Accelerate Growth”9
To an extent “yes if we want to”.
Options - depends which side of the “poverty fence” you sit on?
- Do something?
- Do nothing?
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- Do nothing?
- Panic?
How to combat food inflation
Government
Immediate
“We Accelerate Growth”11
• Interest rates to curb inflation• Control commodity prices• Protect domestic production• Improving food supply chain infrastructure• Integrated food and dairy processing centers
Immediate
How to combat food inflation
Government
Long term
“We Accelerate Growth”12
• Change ratio between natural and forced irrigation
• Improving food supply chain infrastructure• Integrated food and dairy processing centers• Manage political pressures for increasing farm
land availability• Technology transfer from developed world
Long term
How to combat food inflation
Crops and Structure
• New crop strains for uncertain weather
“We Accelerate Growth”13
• New crop strains for uncertain weather• Improve lab to farm speed• Productivity increase through better and cheaper
equipment• Investment in Storage Infrastructure• Diversify sources – S America, Africa• Reduce bio-fuel crop usage?
How to combat food inflation
Individuals
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• Eat better, less and more selectively• Minimize waste• Moderate our meat consumption
So what next?
A gaze into the looking glass…
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Malthus to FEU-US
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Situation 2020
• 1.6 billion to 6 billion in 20th century
• Food production has outpaced population
�Mechanization
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�Mechanization�Green revolution�Land area�Agriculture chemical
• What we have done to get here may not sustain us for 2020 and beyond
What to expect by 2020
• Climate and population
• Water will increasingly become an issue for people and crops
• World will add 890 million by 2020 – 836 million in developing countries
• Food will fall short Wheat Rice Maize
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• Food will fall short
• Prices will increase by 20%
• Trends in dietary habits will change to cope with the shortfall
Wheat
14%
Rice
11%
Maize
9%
Conclusion
• Given current situation volatility will continue• Globally we need a little bit of rethink
“We Accelerate Growth”19
• Globally we need a little bit of rethink
Conclusion
Oh and yeah.. In the meantime if you have a bath tub, better stockpile commodities!
“We Accelerate Growth”20
tub, better stockpile commodities!
Last but not least..
“We Accelerate Growth”21
Thank you
For Additional Information
Donna Jeremiah
Director
Corporate Communications
(603) 6204 5832
Carrie Low
Executive
Corporate Communications
(603)6204 5910
“We Accelerate Growth”
Jessie Loh
Manager
Corporate Communications
(65) 6890 0942
