Inflationary spiral could spell an end to era of cheap food

The market is rebalancing as fields are turned over from fuel crops to biofuel

Parisians are bemoaning the price of a baguette, Italians have organised a pasta boycott and the Mexican public have held street protests about the cost of tortillas. Rocketing food prices are infuriating consumers and pressurising politicians worldwide. But is this a temporary blip, or has the era of cheap food come to an end?

Part of the problem is short term. Catastrophic droughts and very poor harvests in many of the world’s big food-growing regions, including Australia, have driven up the price of grains, particularly wheat. In Britain, meat prices could also rise if the foot-and-mouth crisis continues.

But there are longer-term, more structural forces at work. In particular, high oil prices and the desire to tackle global warming have led to an explosion in demand for biofuels, based on food crops. Farmers are finding that it’s more profitable to turn fields over to growing fuel than food. In the US alone, where plant-based ethanol receives generous federal subsidies, this year’s maize crop is 20 per cent larger than last year’s, as a result of the biofuel boom.

The more grains are turned over to biofuel, the less is left over for food. That pushes up prices, affecting the cost of staples like bread and tortillas; but since grains are often fed to livestock, it also affects meat prices. ‘There’s a huge knock-on effect,’ says Kona Haque, senior commodities editor at the Economist Intelligence Unit. She calculates that maize prices will rise on average by 36 per cent this year, and wheat prices by 18 per cent; and she predicts further, smaller increases next year.

The Guardian