Growing demand for food stretches limits of the planet to produce

ALTHOUGH food prices have been a significant contributor to the jump in the consumer price index, increasing interest rates will not make a trip to the supermarket any cheaper.

The Reserve Bank cannot make it rain to break the record drought and it cannot control the soaring global prices of agricultural commodities.
Poor grain harvests around the world, the growing hunger of the biofuel industry for grain, and increased demand in China for grain-dependent commodities such as dairy and pork are driving prices higher.

China’s growth is not just driving Australia’s resources boom, it is driving an agricultural price boom as millions become wealthier and look to adopt a Western diet based on livestock.

The Westpac-National Farmers Federation Commodity Index found that global agricultural prices are a “staggering” 30.6 per cent higher than a year ago.

Australia is one of the world’s biggest grain, beef and dairy exporters, and conditions here help shape their global prices.

In the Murray-Darling Basin food bowl, the irrigation dams that provide water for everything from potatoes to animal feed are lower than ever before.Water that would normally trade for less than $100 a megalitre is changing hands for more than $1000 as some farmers struggle to simply keep permanent fruit plantings alive.

The price of grain has more than doubled in the past year. Grain makes up 60 per cent of the price of a chicken and the Australian Chicken Meat Federation said yesterday consumers faced a price rise of 20 to 30 per cent.

Fruit prices (up 9.6 per cent) and vegetable prices (6.9 per cent) were “significant contributors” to the latest CPI movement.

Sydney Morning Herald (Australia)