Emerging Asia will face a food crises: MADRID, April 30 (Reuters) - A billion people are seriously affected by soaring food prices in Asia's developing economies, the fastest-expanding in the world, the Asian Development Bank (ADB) said on Wednesday. Measures to counter the surge in food and fuel prices will be the focus of the ADB's May 3-6 annual board meeting in Madrid, Spain, the bank's Managing Director Rajat Nag said. "This is already a grave problem for the poor," Nag told a press conference. "It's an issue of rising prices rather than supply problems." Higher food prices on global markets have been blamed on rising Asian demand, weaker harvests, biofuels and higher energy costs. Inflation is expected to rise to a decade high 5.1 percent this year in emerging Asian countries, according to the ADB. "We believe this is the greatest policy challenge which we face," he said. The bank is planning loans for food aid programs and long-term projects to improve agricultural infrastructure in Asian countries. The ADB approved $10.1 billion in low-cost loans in 2007 for projects and technical assistance in poorer countries. The Manila-based bank is funded by its 67 member countries -- 48 from the Asia-Pacific region, 19 from elsewhere. The ADB expects growth in Asian developing economies to slow to 7.6 percent in 2008, down from 8.7 percent last year, due to the global credit crisis. It sees 7.8 percent expansion in 2009. To see full ADB estimates, (Reporting by Andrew Hay; Editing by Ron Askew)
Subcontracting the Subcontinent - A Commodity Boom : "Nature is rich, she is generous, she refuses to no one who will ask his share of her treasure of which she has inexhaustible reserves in the trees, in the mountains, in the sea. But one must know how to climb the tall trees, how to go into the mountains... One must know how to catch fish, and how to dive to tear loose the shellfish so firmly attached to stones at the bottom of the sea. One must know, one must be able to do things." - Paul Gauguin, Noa Noa Paul Gauguin, the famous painter, moved to the South Seas in 1891. There he painted and sketched and also recorded thoughts in his journal, since published as Noa Noa, which I recently read. Among his many observations was the one quoted above. Though he is far apart from us in both time and space, I have had this thought of his in my head of late, because it applies to the current commodity boom. The price of commodities swept higher in late February. Only two months into the year and natural gas was up 26 percent, coal up 56 percent and platinum up 41 percent. This in two months! We know there are tons of this stuff in this big ball of a planet we call home. The trouble, as Gauguin would point out, is that you have to know how to find it, get to it and dig it out. Aye, there is the rub. As global demand explodes for nature's riches, it takes time for the market to deliver the goods.So, too, copper and aluminum were within striking distance of all-time highs. Believe it or not, the consensus heading into 2008 was that the unfolding global slowdown would take these metal prices lower. That certainly didn't happen. Some of the price rise was due to supply problems in China and South Africa. Producing these metals requires a lot of energy. Yet persistent blackouts and power issues plague producers in these countries. In any event, aluminum topped $3,000 per ton for the first time since May 2006.Copper hit $8,500 per ton, near all-time highs, as Chinese consumption remains high. Global copper inventory covers only about three days worth of global consumption. With a market running that tight, prices remain susceptible to big spikes. Credit Suisse says copper could spike to $12,000 per ton, partly on the rising cost of sulfuric acid, which about a quarter of copper producers use to process copper ore.But the biggest driver behind metal prices such as copper and aluminum is the huge global demand for infrastructure. Morgan Stanley estimates that emerging markets will spend $21.7 trillion on infrastructure over the next 10 years. Power plants, roads, bridges, airports... One sleeping giant in all of this is India. I see it in ABB Ltd. (ABB: NYSE), the world's biggest maker of electrical grids - and the world's third largest buyer of copper. India is the fifth largest market for new orders for ABB. In the last quarter, new orders were up 42 percent in India. ABB claims its orders in India will double by 2010! Certainly, when you compare India's consumption of metal on a per capita basis with that of other countries, you see enormous room for growth. (See chart.) This is not idle wondering. This has real merit, like mixing vodka and tomato juice. Increased metal consumption is practically a given. India desperately needs more power. (See chart) And India's government will end billions of dollars adding around 600 gigawatts of electricity by 2030 All of this infrastructure requires a lot of metal, especially copper. Hence, one of the hot growth sectors in India is its metals and minerals. Most investors tend to hink of India's famous technology companies. But here is an industry still in the early stages of growth. India has substantial deposits of bauxite, iron ore, copper, zinc and more. In some of these, India's reserves are among the largest in the world. With all the demand for metals both from India itself and abroad, India's production has ramped up significantly. Indian companies are also among the lowest-cost producers in the world. In many parts of the world, and especially here, the need for infrastructure is on the rise. But in developing countries like India, we're seeing some of the biggest demand spikes for these types of resources. Stay tuned to this situation and keep following these exciting price spikes... Regards, Chris Mayer, Editor, Capital and Crises.
