Flip through the latest issue of Gulf Weekly.
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.
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.
Paris-based think-tank the OECD (Organisation for Economic Co- operation and Development), in a report published jointly with the UN, said last week that the biofuels bonanza could push food prices above their long-term averages for a decade. There are also fears that if unusual weather events become 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. This is a slow process, however. 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 UK supermarket chain Waitrose, takes the long view. He points out that, while wheat prices have risen 90 per cent in two years, this follows a decade-long fall, and is now at similar level to that reached in 1997.
Mr Price warns that lower-price supermarkets can absorb commodity price rises only by lowering the amount of quality ingredients in their products. But he said any pressure on farmers to drop their prices has to be resisted, as they are already under huge economic strain.
Looking ahead, he says, domestic producers in developing countries will be stimulated to increase production, to serve their home markets.
