Diverging Trends For Asian Food Price Inflation
BMI Asia: We expect food price inflation in Emerging Asian countries to remain broadly stable, following a slight and temporary reacceleration at the end of 2013. Skyrocketing basic food prices in India, Indonesia and Pakistan will continue to drag up the regional food price index. Meanwhile, other emerging countries in Asia will maintain low food price inflation, as rice prices retreat below current levels and grain prices remain relatively low.
After over a year of food price disinflation between August 2011 and August 2012, food consumer price inflation (CPI) in Asia reaccelerated slightly in 2013, driven by the rally in grains prices in H212 and elevated rice prices. Our view stated in January 2013 that food CPI in Asia would temporarily pick-up due to continued high grains and livestock prices before easing in H213 has played out (see 'Temporary Pick Up In Asia Food CPI To Ease In H213', January 24). Indeed, our Emerging Asia Food Consumer Price Index - a simple average of the constituent countries' Food CPI - has risen since December 2012 and would be on a downtrend since March if India and Indonesia were excluded. Food price inflation in these two countries came in surprisingly strong in recent months and boosted the entire index. Meanwhile, the majority of Emerging Asian countries have recorded declining or low food price inflation.
In Indonesia, rising food inflation reflects the rapid sell-off the rupiah that has taken place over recent weeks, in a country which imports large amounts of foodstuff. The significant hike of fuel prices in June is also pushing up food prices via skyrocketing transport costs (see 'BI To Retain Tightening Bias As Inflation Quickens', September 5 2013). In India, unprocessed food wholesale price inflation came in at 19.9% y-o-y in December, compared with 10.6% a year ago. Food inflation was fuelled by late planting, disruptions in supplies of staple vegetables and onions due to heavy monsoon rains and by the continuous increase in production subsidies.
|Stable For Now|
|S&P GSCI Grains & Livestock Indexes, Front-Month CBOT Rough Rice (LHS) & EM Asia Food CPI (RHS), % chg y-o-y|