Why 25% of your income could soon go on food

published 14 September 2007

The OECD has joined the growing chorus of voices questioning the expansion of biofuels with the publication of a report that says the rush to promote these fuels is pushing up food prices and damaging the environment. A July report from the UN Food and Agriculture Organisation said much the same thing.

The Bush administration's subsidies for corn-based ethanol have already diverted much of the US crop from food to fuel production, said Martin Hutchinson on Breakingviews. But there are other reasons for rising food prices. When corn prices rose early this year, the Mexican government put a price ceiling on their food staple, tortillas. Such price controls, common in poor countries, "stunt the development of domestic agriculture". Rich countries, such as the US, Europe and Japan, make things worse with protectionist trade barriers that block commodity imports from countries that "could run bigger surpluses". And we're not just talking about food imports. Biofuels can be more efficiently produced in tropical regions too, which is why the OECD has called for these tariffs to be lifted.

That still leaves the problem of rising food demand, coupled with a finite supply of arable land, says The Times. China's 1.3 billion inhabitants have discovered a taste for meat and dairy items, and changing food consumption in other developing countries will have "far-reaching effects". Food is going to get a lot dearer. By some estimates the proportion of British household incomes devoted to food could rise from 10% to 25% within a decade (last week, a Hovis loaf went up by 8p). "For those with the energy to turn their fields into boutique farms, the outlook is bright. The rest of us must hope that the average Chinese is content with a tall latte and doesn't develop a taste for a venti."