The Westernization of Asia's diet is partly behind the rise in food costs. Rapid growth, rising incomes, growing populations and urbanization are conspiring to shift eating habits away from the staples of old toward livestock and dairy products.
The growing pains inherent in shifting consumption patterns will be especially acute in this region. Unlike the food-price spike of 2008, this one may be more secular than cyclical. Asia alone, for example, will have another 140 million mouths to feed over the next four years. Add that to almost 3 billion people in the fast-growing region and you have a recipe for booming demand.
China's size and scope means it will be buying up ever-growing chunks of the world's food supply. As the yuan rises, so will China's ability to outbid everyone else. Increased trade tensions are inevitable and it will show the futility of food subsidies. Prices will rise as long as consumption does, so it's really a matter of pouring money down the drain.
Weather's Wrath
China also shows how changing weather will bump up against rising living standards. Severe droughts are imperiling wheat crops in the world's largest producer. It's creating shortages of drinking water both for China's 1.3 billion people and livestock. It's a reminder that water is the next oil. Governments will be scouring the globe for it before long.
Rising food prices will complicate things for China's central bank. That goes, too, for India, Indonesia, the Philippines and even less developed economies from Pakistan to Vietnam.
This will be an inconvenient reality check for Asia bulls. Take Indonesia, the fourth-most populous nation and home to the biggest Muslim population. Food prices make it harder to deliver higher living standards and narrow the gap between rich and poor. The same goes for other countries in which population growth often outpaces gross domestic product, like the Philippines.
What's killing households surviving on a few dollars a day is price volatility. If you spend almost half of your income to fill bellies, a 10% surge in cooking oil, wheat or chili peppers is devastating. It's hard enough to pay rent and handle health-care costs today, never mind investing in education.
Governments need to get busy softening the blow, even at the expense of rattling the folks at Standard & Poor's and Moody's Investors Service. Otherwise, they will have a bigger crisis on their hands than voters or investors alike can stomach.