KEY POINTS:
High prices are their own worst enemy.
Or so we are assured by the OECD and the United Nations' Food and Agriculture Organisation, no less, in a joint report on the outlook for global agriculture over the next 10 years.
They have every confidence that high world food prices will burn off demand and encourage additional supply.
But current prices reflect both transitory and permanent factors, they say. So while prices should ease from their recent peaks, average levels over the next 10 years can be expected to be well above the average of the past 10.
This sanguine view comes as something of a relief.
Over the year to March, food and petrol prices accounted for more than half of New Zealand's 3.4 per cent inflation rate, even though they account for less than a quarter of the consumer price index.
It is a global phenomenon. It may be outside the Reserve Bank's target band and heading north, but our 3.4 per cent inflation is respectable compared with 4.2 per cent in Australia, 4.1 per cent in the United States and 3.5 per cent on average across the OECD.
However, former Reserve Bank of Australia governor Bernie Fraser last week raised the possibility that recent increases in food and oil prices might prove to be "not episodic, but structural and secular".
If so it would require central banks to rethink the way they tackle inflation.
The question is whether there has been a fundamental shift, a secular turning point, which means prices for agricultural commodities will not resume their long-term trend decline in real terms, but instead wobble around a rising trend.
What if food price inflation proves to be a persistent or a repeated feature of the world going forward? And the same for oil?
It is not hard to imagine why they might. World oil demand has risen 4.3 million barrels a day over the past four years, according to the International Energy Agency. That is equivalent to half of Saudi Arabia's output.
Consider where the industry is looking for the new supply to meet that relentless rising demand: Central Asia, which is about as far from the open sea as you can get, and deep offshore waters like the Great South Basin, which requires very costly rigs.
And for connoisseurs of irony, even the shrinking Arctic ice cap is seen as a potential new oil province.
So while market forces can be expected to work their magic, no one seems to be expecting a return to US$30 a barrel of oil or anything like it.
The OECD-FAO outlook assumes oil price increases are permanent and further gradual increases are likely.
The result is a structural increase in the cost of growing food and delivering it to consumers.
They also estimate that more than half of the increase in demand for grains and vegetable oils over the past two years was due to biofuels and that this will be another permanent factor.
It is such a wicked waste of food one would hope they are wrong.
Technology may come to the rescue, whether it is developing ways of making transport fuels from the inedible bits of plants or entirely different means of propelling vehicles.
But that will not change the two big drivers of increasing demand for food: population and income growth.
The demographers tell us to expect another 3 billion mouths to feed by the middle of the century.
And as people move in large numbers out of poverty into middle income brackets they tend to demand more animal protein, which takes more land and water to produce.
As an efficient producer of the foods of affluence this is an encouraging trend for New Zealand.
On the supply side, much of the world's food production depends on unsustainable use of water, while land is being lost to expanding cities and deserts, and climate change is expected to redistribute rainfall.
On the question of the long-run capacity to increase food supply, the OECD-FAO report sits on the fence.
"One argument reiterates messages of climate change and water overuse, suggests that yields are peaking and sees little scope for further supplies," it says.
"Another argument emphasises the potential for human innovation to continue or even quicken yield trends, particularly when motivated by a high price, and the unrealised potential countries that are still in stages of development associated with low productivity."
The second, happier scenario would be more likely if markets were allowed to function properly.
Instead, trade barriers around rich countries and domestic subsidies within developing ones bedevil what is a vital industry.
Even if it is too soon to be dogmatic about the matter, there is at least an arguable case that the world has passed through a major turning point from an era of cheap oil and a secular decline in real agricultural commodity prices to one in which both fuel and food prices wobble around a sustained up-trend.
That raises disquieting questions for central banks charged with keeping the lid on inflation.
They were successful in dealing to the widespread and rampant inflation of the 1970s and 1980s, but the world has got a lot bigger since then with the integration of China and India into the global economy and the collapse of the Soviet empire.
This has expanded both the supply and demand sides of the system. It changes everything.
If repeated periods of imported inflation from global oil and food prices are to be a feature of the future, it will challenge monetary policy arrangements which are all about quenching the very different kind of inflation which arises from an excess of domestic demand.
Higher interest rates do nothing to address the seat of the problem, which is out of the central banks' reach, though they may buy some short-term relief through a higher exchange rate.
How do you keep inflation expectations anchored, and avert a return of the dreaded wage-price spiral, if items which people buy frequently like food and fuel are continually going up in price?
Defeating inflation in the late 1980s and early 1990s was not just an exercise in monetary policy.
It required a bunch of other policies which - in one way or another - exposed people to the discipline of competition.
Now, once again, monetary policy needs all the mates it can muster.
