Rising Food Prices May Spur Asian Inflation in 2011, Nomura's Khatri Says
Increased demand for food in Asia will help to boost prices next year, fuelling faster consumer inflation, according to Yougesh Khatri at Nomura Holdings Inc., who flagged rising costs as a “key theme” for 2011.
Costlier food was likely to hit Asia hard as edible goods account for “a fairly large chunk” of the baskets that governments use to calculate the pace of price changes, said Khatri, a Singapore-based senior economist. “That is likely to show up as particularly severely impacting CPI next year,’ Khatri said in an interview on Bloomberg Television.
Khatri’s comments add to forecasts from Deutsche Bank AG and Rabobank Groep NV that farm-goods prices may rally in 2011. Food inflation in India gained to a six-week high this month. China needs to be prepared for a long fight against inflation, the National Development and Reform Commission has said.
Inflationary pressures in Asia are coming both from inflows of capital to the region and rising food prices, Khatri said, without identifying specific foodstuffs. Inflation is “our key theme for next year,” he said.
The Food & Agriculture Organization’s Food Price Index of 55 commodities surged for a fifth month in November to the highest level in more than two years. Soybeans rallied to $13.6575 a bushel yesterday, a 28-month high, on demand from China. Palm oil has surged 37 percent in 2010, while raw sugar in New York has gained to the highest level in 30 years.
‘Still Cheap’
Farm-commodity prices including corn will extend rallies next year driven by increased demand and higher energy costs, according to a report from Rabobank this week. A lot of agricultural commodities including corn, soybeans and wheat are “still cheap” even after recent rallies and may extend gains, Deutsche Bank’s Michael Lewis said last month.
The consumer price index in China grew by 5.1 percent last month, the fastest pace in 28 months. Gains have been caused by factors including global commodity prices and excess liquidity, China Central Television said Dec. 21, citing Peng Sen, vice chairman of the National Development and Reform Commission.
India’s Cabinet Secretary K.M. Chandrasekhar said yesterday that the government will take measures to cool food-price inflation. An index measuring wholesale prices of farm products including rice and vegetables compiled by the commerce ministry rose 12.13 percent in the week to Dec. 11 from a year earlier.
To contact the reporter on this story: Jake Lloyd-Smith in Singapore at jlloydsmith@bloomberg.net
To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net
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