KEY POINTS:
Parisians are bemoaning the price of a baguette, Italians have organised a pasta boycott and the people in Mexico have held street protests about the cost of tortillas.
Rocketing food prices are infuriating consumers and putting pressure on 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 largest food-growing regions, including Australia, have driven up the price of grains, particularly wheat. In Britain, meat prices may also rise if the foot-and-mouth crisis continues.
But there are long-term, more structural forces at work - 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 it that it's more profitable to grow fuel than grow food. In the United States alone, where plant-based ethanol receives generous federal subsidies, this year's maize crop is 20 per cent larger than it was last year as a result of the biofuel boom.
The more grains are turned over to biofuel, the less is left for food. That pushes up prices, affecting the cost of staples such as bread and tortillas. And because grain is 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 an average of 36 per cent this year, and wheat prices 18 per cent.
The Organisation for Economic Co-operation and Development, in a report published jointly with the United Nations, said the biofuel bonanza could push food prices above their long-term averages for a decade.
There are also fears that if unusual weather becomes more common, bad harvests could become frequent - although the International Panel on Climate Change says small temperature rises will increase crop yields in some climate zones.
The growing affluence of China and India, and the resulting increase in demand for food, is giving another boost to food prices.
But that is a slow process. China consumed 18 per cent of the world's maize production in 1997. This year, after a decade of extraordinarily rapid economic growth, it will swallow 19 per cent.
Mark Price, boss of upmarket supermarket chain Waitrose, takes the long view, saying that although wheat prices have risen 90 per cent in two years, that followed a decade-long fall, and prices were now similar to those reached in 1997. He said that lower-price supermarket chains could absorb commodity price rises only by lowering the amount of quality ingredients in their products.
But he said that any pressure on farmers to drop prices should be resisted as they were already under huge economic strain.
Price agreed that the adoption by farmers of biofuels, and the growing appetite for milk and meat products from India and China, were likely to put long-term upward pressure on food prices, but he poured cold water on the "end of cheap food" headlines.
Looking ahead, he said, domestic producers in developing countries would be stimulated to increase production to serve their home markets.
"China and India's farming sector will grow to meet demand. There may be a short-term lag, but what's happening in prices is a rebalancing."
The OECD report predicted that investment in food processing in developing countries would also help to increase capacity, and relieve some of the upward pressure on prices.
Simon Hayley, commodities analyst at Capital Economics, said historically high food prices were likely to encourage farmers and agribusinesses to improve technology, and extract more from each hectare. "Biofuels are a genuinely new lump of demand hitting the market," Hayley said. "Short term, supply doesn't respond. But if you look at the long term, it does, surprisingly so."
He predicted that genetically modified crops would create the next wave of a 50-year "green revolution"', a revolution that had already led to improvements in farm productivity - and prevented food prices from rising sharply despite the sharp growth in global population since World War II.
Despite apocalyptic warnings about the rising number of mouths the world's producers have to feed, global population growth actually peaked in the early 1990s.
Haque said public anger about the food price rises was also likely to encourage businesses, and politicians, to look for alternative sources of biofuels.
"There will be a lot more calls for producing ethanol by using non-food crops - wood, biomass, cellulose."
Thomas Malthus, the English political economist, warned at the dawn of the 19th century that "the power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or other visit the human race". But he reckoned without chemical fertiliser, diesel-driven tractors, disease-resistant seeds, and the thousand other innovations that have helped the world to continue to feed itself and which have made famine much rarer than Malthus feared.
Consumers are complaining, and if the OECD is right, prices are unlikely to return to normal for years. But past experience suggests that the next move in the green revolution will not be long in coming.
-Observer
