Marketwatch notes that lower Thai exports will raise prices in HK, while The FT takes more of a helicopter view on things, noting that "Asian governments have long focused on developing high-growth sectors... But that has been coupled with a neglect for farming... Agricultural spending in the region has often been misdirected as governments seek to avoid social unrest by keeping food prices artificially low, rather than improve productivity or increase acreage."
From ABN, looking at Indonesia specifically:
"As global commodity prices reach new highs, the government has been trying to control prices through subsidies, export taxes and supply management. None of these have been working... With the high cost of subsidies, Indonesia faces a growing budget deficit, which could put further downward pressure on the rupiah. We believe the government has the following options: 1. Cut subsidies... the less likely option... 2. Raise interest rates... an investment environment with a likely higher interest rate should be negative for Indonesian equities. We also see a higher probability of more widespread social unrest as the poor are priced out of necessities, especially with rising political tension ahead of 2009 elections."Sell Indonesia.
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And from a fave salesman of mine at ABN: "Here's a ridiculously sad tale; it used to take a coconut farmer 10 trees worth of his coconuts to afford 1 kg of rice. Its now 40. Yet we all know, prices of such goods are rising. Why is he not enjoying the 'fruits of his labour'? Something's gotta give."
As Chookiat Ophaswongse, president of Thailand's Rice Exporters Association, told The FT just last week "I have no idea how importing countries will get rice." (He forecast prices would rise further and warned that importing countries such as Indonesia and Iran had yet to issue tenders, leaving them exposed.)
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