The present spiral in global food costs marks the end of an era of cheap food and will have profound implications for the world
THE CHANGES under way go far beyond the normal flux of economic fortunes,and will have a profound impact on all our lives. For Irish consumers it could mean straitened times; for the developing world, disaster.
"What we're seeing now is the reversal of a trend towards cheaper food that has been going on for over a century. We're at a watershed now," says agricultural economist Alan Matthews of TCD.
He believes the era of cheap food that sustained western prosperity through much of the 20 century is at an end, with a huge variety of factors to blame.
Food is fuel for humans so perhaps it's not surprising that oil price increases are having a knock-on effect on food inflation.
As Pat Wall, associate professor of public health at UCD, points out, agriculture in the developed countries is highly energy intensive. The rising price of oil, therefore, has had an immediate impact on the costs of production. The price of animal feed, for example, has doubled in the past year due to the soaring cost of oil.
The continuing growth in world population and, in particular, the rise of the highly populated economies of China and India as well as their growing taste for western food, have also contributed to rising prices, and will continue to do so.
The growing use of agricultural land to produce biomass crops for fuel instead of food crops has been widely blamed, though Matthews points out that rising energy prices alone, never mind the provision of subsidies, would have encouraged more farmers to turn to biomass anyway.
Our economies are far more sensitive to changes in supply and raw material prices than they once were. It used to be the case that the Common Agricultural Policy (Cap) ironed out the rises and falls in food supply and prices within the EU.
Some €52 billion a year in subsidies went to farmers to encourage them to keep producing and the accumulated surpluses could be released in times of scarcity. However, with the dismantling of the Cap - it will be gone completely by 2013 - the balance between demand and supply is much tighter.
As Wall points out, another consequence of the Cap's demise is that farmers are seeking to retrieve all their costs from the marketplace which is also driving up prices.
The growing phenomenon of speculation on food commodities, which might appear obscene but is engaged in by many of the funds that pay our pensions, may also be contributing to food inflation.
Food production and retailing have made giant strides in recent decades but both may be reaching the limits of their ingenuity.
Wall says: "Supermarkets have kept prices down by driving efficiencies in production and supply. They have been the greatest agents of change when it came to food standards and quality.
"But even the supermarkets realise they can't screw their suppliers anymore or they won't have any suppliers. Eventually, there's no more fat on the carcass so no more efficiency savings are possible."
For decades now, the ever expanding behemoths of the retail world have been demanding goods faster and cheaper, in the process driving prices downwards and their profits skywards. Not any more though; just-in-time delivery systems introduced to minimise expensive storage issues have gone as far as they can. The result is a new balance of power, with the supermarket chains more reliant on suppliers than they have been for years.
Producers responded to the pressure from retailers with ever bigger farms and factories, producing goods ever faster.
The time it takes to bring a broiler chicken to market has been cut from 50 days to 39 days, for example. The big conglomerates shifted their attentions to countries like Brazil, where the average cattle herd is 30,000, compared to 100 in Ireland.
Here again, though, limits are being reached; mass production was widely blamed for many of the food scandals that hit Europe, but particularly the UK, over the past decade, from BSE to foot and mouth disease.
"If you push prices down too much, people will end up taking short cuts with standards," says Wall. "There has to be a fair share of profit down the chain."
One prominent food producer, Colin Gordon, chief executive of Avonmore Consumer Foods, believes there is a downside to the era of cheap food we have just experienced.
"Food inflation for many years has been below the average rate of inflation and that is not necessarily a good thing," he told the retail magazine Checkout recently. "Fundamentally, cheaper and cheaper food is not good food - we know that from so many examples in so many countries over recent years."
He points out that while the price of milk, for example, has shot up over the past year, the average annual price increase for the past decade is still "only" at 3 per cent.
"I think people should recognise the real value they are getting from what is an extremely high quality, competitively priced product, that while having increased in price in the short term, it is still very good value in the long term."
What is surprising, perhaps, is how long it has taken us to notice the underlying rise in food prices. They hit rock bottom in 2005 but since then, well before the latest oil price shocks, the graph has been moving upwards.
The only certainty now, it seems, is that this trend will continue for some time to come.
