Rising Cost of Food: Soaring Soyabean Price Stirs Anger Among Poor

January 18, 2008
By Raphael Minder in Hong Kong, John Aglionby in Jakarta and Jung-a Song in Seoul
The Financial Times

During the ancient Zhou dynasty, soyabeans were among China's five sacred grains.

Thousands of years later soyabeans maintain their importance to the Chinese and most other Asians, but they have recently triggered much more down-to-earth preoccupations.

On Monday, 10,000 Indonesians demonstrated outside the presidential palace in Jakarta after soyabean prices soared more than 50 per cent in the past month and 125 per cent over the past year, leaving huge shortages in markets. And while the social unrest has not yet spread to other Asian nations, consumer frustrations are mounting.

From tofu in China to miso, or soyabean paste, in Japan, soya products are an essential ingredient in Asian cuisine as well as staple food for the region's poor.

For many Indonesians, a piece of tempeh, or fermented soyabean cake, is often their only source of protein, and last year soya products accounted for 22 per cent of Indonesians' protein intake, excluding rice, according to government data.

"It's probably double that for poor people, who make up almost half the population, because it's the cheapest protein source," says Harbrinderjit Dillon, an agriculture analyst.

"The crisis shows how low the government has sunk. The public's attitude is that if it can't even take care of [soyabean products] then what can it do?"

World soyabean prices climbed to a record this week, partly because 塩farmers in the US and Asia have instead been growing corn, palm oil and other crops to supply the biofuel industry. Bad harvests in Latin America and rising Chinese demand have added to the price pressure.

"It's finally a trade-off between filling stomachs and filling diesel tanks in cars and trucks," says Ashok Gulati, director at the International Food Policy Research Institute.

The Indonesian government is now taking tentative steps to address the price surge, but their impact could prove limited. Mustafa 塩Abubakar, the head of 塩Indonesia's government logistics agency, said on Thursday that Jakarta would import lower-quality soyabeans than previously from the US to help contain the price surge.

Authorities in other countries are also starting to act. In South Korea, the national agency handling imports, Korea Agro-Fisheries Trade Corporation, is poised to increase soyabean imports to contain prices, while the Korean agricultural ministry has formed a taskforce to deal with the worries over price.

Meanwhile, food producers have been quick to pass on higher costs to consumers. In Japan, miso companies recently announced rises of 10 to 15 per cent.

In South Korea, soyabean prices increased by 10.7 per cent in December alone, translating this month into retail price rises of up to 30 per cent for soya milk, snacks and some other soya goods.

In Hong Kong, tofu sellers at the city’s Graham Street market have raised prices for the first time in at least 10 years.

“Our costs have gone up because the tofu factories have increased their prices twice since last October,” says Ng Chou, 73, whose family’s To Kei tofu store has been in existence since 1949.

A slab of tofu from Mr Ng that cost HK$4 (50 US cents) last October now costs HK$5.

An essential problem for Asia is its dependency on imports.

Japan imports 95 per cent of the roughly 4m tonnes of soyabeans consumed there each year, with three-quarters of the total coming from the US. Casting its ever larger shadow over world prices is China, already the world’s largest importer.

Chinese demand has been surging, particularly for soya°©beans used as feedstock as a more affluent society raises its meat consumption. Chinese pork prices have climbed about 80 per cent over the past year – a much bigger source of popular frustration.

In the coming decade °©Chinese import demand is set to “dwarf all other countries” and account for more than three-quarters of the projected gain in world soyabean trade by fiscal 2017, according to the US Department of Agriculture.

“China is the biggest swing factor for the soyabean market. Period.’’ says Dong Tao, a regional economist at Credit Suisse in Hong Kong.

“Chinese soyabean im°©ports are very volatile, as imports supplement domestic production, and the swings can be hard to explain.”

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