Asian states hit by global rice shortage

Asian countries have been struggling to cope as the cost of rice has reached record levels.

The price of the staple crop has risen by as much as 70% during the last year, according to the UN Food and Agriculture Organisation (FAO), with increases accelerating in recent weeks

Rice prices hit the $1,000-a-tonne level for the first time on Thursday as panicking importers scrambled to secure supplies, exacerbating the tightness already provoked by export restrictions in Vietnam, India, Egypt, China and Cambodia.

The jump came as the Philippines, the largest rice importer, failed for the fourth time to secure as much rice as it wanted.

The unsuccessful tender followed Bangladesh’s inability to buy any rice at all this week.

The global agricultural crisis is threatening to become a political one, pitting the United States and other developed countries against the developing world over the need for affordable food versus the need for renewable energy.

Many poorer nations worry that subsidies from rich countries to support biofuels, which turn food, like corn, into fuel, are pushing up the price of staplesThe World Bank and the United Nations Educational, Scientific and Cultural Organization both called on major agricultural countries to overhaul policies to avoid a social explosion from rising food prices.

Looming crisis of $1 trillion

Worldwide losses from the American credit crisis could near $1 trillion, the International Monetary Fund said yesterday, reflecting the massive cost of the breakdown in markets for home mortgages and other kinds of debt.

There was a recent report that the problem of the defaults on sub prime loans was two fold: first, mortgage companies lending money based on the financial statement made by the buyer and second; the falsification of income by the buyer.

This means that lending agencies allowed loans to home buyers who were not credit worthy and the risk of defaulting was very high when they borrowed the money.

Now the inevitable huge bankruptcies of home buyers in America has led to major financial meltdown in the United States with severe negative implications in the global financial markets.

The IMF estimated that banks, insurance companies, pension funds, and other kinds of investors will suffer huge losses: $565 billion on U.S. home mortgages, $240 billion on debt backed by commercial real estate such as office buildings and shopping centers, $120 billion on corporate loans such as those used to acquire businesses, and $20 billions on consumer loans such as credit cards.

Those figures add up to $945 billion in losses expected within two years. That would be about $143 for every person on Earth, or $3,100 for every U.S. resident.

Irresponsible behaviour of people borrowing, banks lending without sufficient credit checks and lack of adequate oversight by the US government has unleashed gigantic financial looses, the full extent of the pain and dislocation is hard to comprehend as yet.

ADB warns over increasing inflation in Asia

The Asian Development Bank (ABD) has warned that inflation will reach its highest level in a decade in most of Asia this year, threatening to reverse recent gains in productivity as well as creating fiscal strains for governments that provide massive subsidies for fuel and food.

The ADB haslowered its economic growth forecasts for the region as a global slowdown weighs on exports and expansions in China and India cool.

Bloomberg reports that Asia excluding Japan is predicted to expand 7.6 percent this year, less than a September estimate of 8.2 percent, the Manila-based institution said in a report today. The economies grew 8.7 percent in 2007, the fastest clip in almost two decades.

Central banks will pursue policies to quell inflation rather than spur economic growth, the ADB said, the second organization this week after the World Bank to warn of the threat of rising energy and food prices to the region. China will implement a ``tight'' monetary policy this year, the government's State Council said yesterday.

``The major risk lies not so much in softer growth but in rising commodity prices and accelerating inflation,'' the ADB said. ``Appropriate macroeconomic responses to accelerating inflation are likely to include tighter monetary policy and some exchange-rate appreciation.''

Crude oil rose to a record $111.80 a barrel last month, while prices of food staples including rice, wheat and soybeans and palm oil have surged amid increased demand and higher fuel and freight costs.