Q&A: will food prices continue rising?

Strange that the article doesn't mention land used for growing stuff to be used in bio-fuels?

As I have pointed out ad nauseam to the thoughtless urban masses there is only a certain amount of fertile land and an ever increasing number of people to feed.

Don't bury any more land under ill thought out housing developments or we will find ourselves even more at the mercy of foreign supplies.

There will be starvation and food shortages in Western Europe before the end of the current century.

The time has come to curb population growth----As a saving all child benefit and child tax credit payments should be stopped immediately--why subsidise the thoughtless and improvident to breed what they can't feed?

If a loaf of bread is made with .5kg of flour that means you can make 2000 loaves with a tonne. If the price of milling wheat is £100/t that means that the value of the flour is 5p/loaf. If milling wheat is £200/t that means that the value of the flour is 10p/loaf. Perhaps the question that the BRC needs to answer is why does a loaf of bread cost £1. Maybe it is 50p for the supermarket, 40/45p for the baker and between 5 and 10p for the farmer. Now you know why supermarkets make record profits every year. The value of the main input is so modest that it disgusts me that they would like to pull the wool over your eyes that it really makes much difference, perhaps they should prune their margin.

You know everybody blames the recession on the bankers, this in my opinion is incorrect. Yes thay had a hand in it as did the enoromous increase in the price of Fuel (gas and oil) and the huge increase in staple foods all over the world, mainly due to bio-fuel programmes. If oil and gas continue to stay at the levels they are and basic food stuffs do increase, along with basic commodities, as they have done in recent months, we'll be in for a "double-dip" recession.

Despite all this talk of food price increases, it is interesting to note that a UK farmer is getting paid approximately the same amount for a tonne of bread-making wheat (circa £150/t) as he was back in 1987. And that is before inflation.

It is also pertinent to remember that the majority of EU arable and livestock farmers would not be making a true profit without the payment of government subsidies, even at these new increased prices.

It could be argued that food is far cheaper than the costs of production would suggest is viable, with the purchasing power of major retailers playing a large role in capping prices for the consumer. In real terms UK households are spending less on food than they were in the 1950s (c15% v 33%), but are buying a wider range of better-quality produce than ever before.

Grain and butter mountains were a dirty word in the 20th Century, but the effects of reduced world stocks of grain can clearly be seen whenever there is a poor harvest and speculators enetr the market.

Wheat is now traded by investors like any other commodity and as the graph on page two of the report below shows, its price is just as volatile as crude oil and does not necessarily reflect the real fundamentals of supply and demand.

http://resources.knightfrank.com/GetResearchResource.ashx?id=11999

John Lacy; the change in common agricultural policy in 2005/2006 meant that European Farmers were no longer subsidised by the governments for the food/crops that they produce, but rather the way in which they keep the land that they produce the food on, i.e. if the land is kept in an environmentally friendly way, the land owner would recieve more government subsidies.

This change was intended to benefit the environment, however it led a lot of landowners putting their arable land into grass - just for the subsidies. This reduced 'food mountains' and excess of products that the market didn't need, and brought farming closer to the true markets. (sorry for the history lesson).

This change meant that supply and demand were more closely monitored and the industry became more competitive - so prices 'should' be about right! If someone wants to shop elsewhere (other that supermarkets) then that's great, but farmers need to work together to get the economies of scale the supermarkets benefit from - then we will stop hearing complaints about supermarket profits.

This is just my opinion.

Anyone tried baking their own bread and growing their own veg? - all us 'urbanites' can give it a go and reduce the reliance on overpriced/overpackaged supermarket goods, even just a little!

Seems to be some good comments above but whilst we talk of food price inflation I think the bigger issue is that of Food Security.

We have an ever increasing population, which we will have to house. Where will the land come from to grow the crops and what's the point if the farmers can't get a real return?

Also, face the fact that the East is getting richer - they will want more food and they will be prepared to pay for it.

We need to face two issues (at least)

1. We should get used to paying more for good quality food (that means more for the farmers and producers - not more margin for the major multiples)

2. We need to be producing more here in the UK, not keep relying on imports. If that means making difficult political decisions, face them now and plan rather than a knee jerk response when its all too late.

Put together decoupling of EU farm subsidies from 2005 with downward price pressure on producers from supermarkets, add in unstable, global commodity markets, global warming leading to extreme weather changes, skills expertise leaving farming for more stable, better wages and hours elsewhere, fewer young people entering the industry, food that has become so cheap that UK consumers throw a third of it out contributing to global warming, then for good measure, add in an education system that doesn't teach home economics or indeed any worthwhile practical subject like horiculture, and you have the perfect storm.

Unless some means of population control more effective than the Black Death saves the planet, future generations will be killing and eating each other to survive.

I hope you'll excuse some woolly paranoia, but could Russia be exploiting the wheat shortage in some way? I think they are being a bit nicer to companies these days, but markets and geopolitics are a different matter.

Isn't the problem really about the effects of the 25% devaluation of Sterling?

To William Luttman-Johnson.

Unfortunately you cannot explain the economics of producing a loaf of bread in such simplistic terms. Their are a number of variables at each stage of the process which determine what the profit/loss parameters are. The main factors to consider are that there is only a 6 week window of opportunity in which to harvest the main ingredient. (wheat). Flour millers and subsequent bakeries require continous daily supplies, so in order to fullfil these demands a whole series of logistics systems and storage facilities are involved.

To put a handle on these activities and provide a platform to monitor supply and demand fluctuations wheat becomes a commodity which is traded by forward contracts on corn exchanges around the world.

It follows therefore that a store of wheat sitting in a silo in Lincolnshire may at some stage be bought and sold by a trader in Chicago. Likewise the grain leaving a combine harvester on the kentucky prairies may in fact be owned by a man wearing suit and tie sitting in an office in Bristol.

JT, Phillip Swift and Jeremy Bosk you all have valid points. Successive governments from the 1960's onwards have ignored food security (and even more disastously energy security). We need to produce our own food for a reducing (or reduced) population. This would negate fluctuations in Sterling values as the damned stuff won't have to be imported.

I wonder what profits will be made by some of the investment banks based on Russia's latest tactics! Come on, wake up.... look at Cuba and how self-sufficient they are, no import nor export so they have to be! Allotments are being used like never before, we should all start to do something a bit closer to home.... the supermarkets will suffer and change their tactics too!!

jusy wait until the chinese get wealthier and start wanting a western lifestyle. they will use up all the worlds resources within a decade.