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Is the age of low-cost food about to end?

Billy Adams

It's enough to make anyone feel a touch queasy.

The weekly supermarket trip is getting more expensive. Prices are creeping up.

But here's something to really put you off your dinner. The long and lucrative era of cheap food is coming to an end.

The reasons are many, but experts generally agree that the days when people in developed countries forked out less than 10 per cent of their income on food will soon be a distant memory.

Worrying factors, from burgeoning new demand in China to climate change, are placing unprecedented pressures on the world's ability to feed itself. Since the turn of the century the planet has consumed more grain that it has produced. Reserves have slumped to just 10 weeks - the lowest in a generation. In the so-called 'soft commodities' market, prices are spiralling.

Corn costs twice as much as a year ago. Wheat has jumped 65 per cent since 2005. Rice and cereal prices have hit a 10-year high, while milk, butter and soybeans have posted rises of 50 per cent. The knock-on effect in shops is starting to be felt.

Soaring costs of animal feed have also struck meat and dairy prices. In the mainland shoppers are paying almost 50 per cent more for pork than at the same time last year. According to a United Nations report released last month, the major cause is the sudden international craze for using crops to power cars. Biofuels are popular because they reduce nations' reliance on oil from the Middle East and are promoted as a greener alternative to fossil fuels.

Led by the United States, China, Brazil and Europe, global production has doubled since 2002 and is set to do so again by 2011. But turning corn, wheat and sugar into ethanol has created huge new demand for traditional food crops - and squeezed the amount of land on which to grow them - causing the sharp price spikes.

In developed countries that translates into higher shopping bills, but for the world's poorest people it could spell disaster. Last month Earth Policy Institute economist Lester Brown told the US Senate: 'The stage is now set for direct competition for grain between the 800 million people who own automobiles and the world's two billion poorest people.'

No prizes for guessing the most likely winners.

Nowhere has the recent push towards biofuels been more apparent than in the United States, where President George W. Bush wants to cut America's petrol use by 20 per cent over the next decade.

Generous government subsidies have sparked the construction of hundreds of ethanol plants. The target is a fivefold increase in production by 2017, mainly from corn. Similar biofuel goals have been touted around the world, prompting fears that the poor could be priced out of the market for essential food.

Earlier this year, thousands of protesters rioted in Mexico after soaring corn prices doubled the cost of tortillas. Reports that people elsewhere are feeling the pain are becoming more common.

Last week research highlighted how the poorest areas of the world likely to be hit hardest by the price rises are least equipped to cope.

British charity Save the Children said that people in many Third World and developing countries simply could not afford to eat a simple nutritious diet containing the most basic staples.

In Bangladesh, an average family would have to spend three times its salary to eat properly.

The UN says 854 million people worldwide already suffer from hunger. And when it takes 200kg of corn to fill an energy-hungry 4 wheel drive, biofuel critics argue the implications are chilling.

One of those is Jean Ziegler, the UN's special rapporteur on the right to food, who is blunt in his assessment of the potential consequences of the biofuel boom. 'It [the price] will be paid perhaps by hundreds of thousands of people who will die from hunger,' he said. The squeeze on food supply comes at a time when the world is producing 70 million more mouths to feed each year.

Increased wealth is also modifying tastes, particularly in the mainland and India where consumers are no longer content to put up with their parents' simple diets. Disposable income is being spent on cappuccinos and cafe lattes. And just as the Japanese and South Koreans developed a liking for high-protein meat meals, taste buds on the mainland are following suit.

The mainland's annual meat consumption may have risen to 6kg per capita, but still has to more than double to reach the intake of richer nations.

The UN estimates that 30 per cent more beef, 50 per cent more pork and a quarter more poultry will be consumed in developing countries within 10 years. When you consider that the production of meat and dairy products require far more grain the pressures on production and prices are all too clear.

The UN report, jointly prepared by the World Food Organisation and Organisation for Economic Co-operation and Development, painted a gloomy picture for food farming trends over the next decade.

But it took no account of increasingly erratic weather events - blamed by many experts on climate change - that have already devastated some harvests.

In Australia, gripped by its worst drought on record, Prime Minister John Howard famously asked people to pray for rain earlier this year to save the nation's 'food bowl'.

The downpours finally came to some areas, but not to the key parts of the Murray-Darling basin where so much of the nation's food is grown. Two weeks ago users were told there was no more water for their crops.

'Basically, Australia's in danger of not being able to feed itself,' said AusVeg chairman Michael Badcock, echoing predictions that fruit and vegetable prices would soar in Australian stores. He said it would not be long before consumers noticed shortages of - and higher prices - for a range of vegetables.

Farmers are clinging to the hope of wetter months ahead, but not as torrential as the rains that have left large tracts of eastern Australia under water in recent weeks. The flash floods destroyed crops and infrastructure, contributing to a shortfall in global dairy production.

After years of falling or steady prices, the UN estimates that food-price inflation is running at more than 6 per cent in many developed countries.

The mainland's food-price inflation hit 8 per cent in May, while India's has reached 20 per cent this year. That may be bad news for consumers, but it is great for investors in agriculture commodities.

Analysts warn that the burgeoning demand for ethanol will ensure that corn prices soon move in tandem with oil, which is now trading at more than US$70 a barrel. Even worse, claim environmentalists, is that biofuels contribute to global warming, one of the main problems they are supposed to tackle. Biofuels, which are produced from sugar, wheat and maize, require large amounts of land and carbon-emitting energy to produce and transport.

Critics warn rainforests and sensitive habitats are being cleared to meet demand for crops. The majority of the world's biodiesel, which is produced from palm oil and rapeseed, comes from Indonesia and Malaysia. A recent UN study suggested 98 per cent of rainforest in those countries would be gone or degraded within 15 years.

'As the forests are burned, both the trees and the peat they sit on are turned into carbon dioxide,' wrote British environmental activist George Monbiot, quoting a Dutch consultancy report that suggested the production of palm oil produced 10 times as much carbon dioxide as ordinary diesel.

If that sounds disturbing you might want to steer clear of a newly published book, Empty Plates Tomorrow. The author, economist Patricia Dodd Racher, paints a far bleaker picture, linking dwindling energy supplies to a potentially catastrophic famine.

She discusses the effects on food production of Peak Oil, the term for when global production of light sweet crude hits an all-time high before sliding into inexorable decline.

Like a growing number of analysts, Dr Racher believes world oil supplies have already topped out. And because the massive industrialised agricultural sector that keeps us alive is reliant on oil, she believes price rises already caused by higher fuel costs are just the beginning.

'In coming decades the fossil energy to make synthetic fertilisers and pesticides, and to power farm machinery and freight vehicles, will have diminished to an uncertain trickle,' she says.

Dr Racher argues that a return to localised organic food production is unavoidable. 'More of us will need to work in agriculture and all of us will have to slash the amount of energy we use.'

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