Ethanol production increasing food prices

International corn prices driven by the burgeoning U.S. ethanol industry have soared to their highest in a decade, making farmers like Zacaula feel like they just won the jackpot. "I have never seen prices like this," said Zacaula, 66, who has been growing corn since he was 10. "We suffered for so many years, years in which no one even wanted to buy our crop _ until now."

Corn had languished around $2 a bushel for years before the ethanol boom caused prices to soar, reaching $4.04 a bushel this week. Corn prices should reach new highs over the next five years, according to Keith Collins, chief economist for the U.S. Department of Agriculture.

Already 111 U.S. ethanol biorefineries are in operation and 78 are under construction, according to the industry's Renewable Fuels Association. Collins predicts U.S. farmers will need to plant 90 million acres of corn by 2010 _ nearly 10 million more than now _ to meet demand of the rapidly growing U.S. ethanol industry. And that means world markets will need to turn to corn-producing regions such as Latin America to fill the gap if U.S. exports drop.

Latin America's corn farmers are gearing up for such a possibility, snatching up land and blanketing their fields with corn after decades of struggling to compete against cheap, U.S.-subsidized imports. They hope to sell more domestically, and maybe even export more corn.

In the Pacific coast state of Sinaloa, Mexico's agricultural powerhouse, industrial-scale growers recently doubled the amount of acreage of corn, switching 617,750 acres of soybean and other crops. Sinaloa producers, who now have planted corn on 1.1 million acres, are also buying more land, Salazar said.

Growers hope the ethanol phenomenon will cushion what they feared would be a devastating blow with the full opening of borders to U.S. exports of corn and beans in 2008 under the North American Free Trade Agreement, or NAFTA.

Tortilla riots in Mexico, onion protests in India, and Venezuelan supermarkets threatened with nationalisation unless they slash prices. The soaring cost of basic foods is provoking fury among consumers around the world.

The price of corn, the key ingredient of the tortilla, has risen by more than 80 per cent in the past year and wheat is up by more than 40 per cent. Poor growing conditions, including a drought in Australia, are one reason, but Haque says another key factor has been Washington's drive to reduce US dependence on oil by increasing the use of corn-based ethanol as a fuel.

Analysts have warned for some time that corn prices would start to move in tandem with global oil markets, as demand for ethanol increased and farmers turned fields over to filling US fuel tanks instead of Mexican tables. There are also likely to be painful knock-on effects for livestock farmers, who use grains to feed their animals.

Tens of thousands of people have protested in Mexico City at the high cost of tortillas, forcing President Calderon to promise a price freeze.

Full fuel tanks could mean many more empty bellies within the next two decades, according to new research. The number of hungry people worldwide could grow by more than 50 percent by 2020, as corn, sugar and other food staples are increasingly devoted to making fuel here and abroad, according to projections by economists C. Ford Runge and Benjamin Senauer.

The same trend would bring much higher food prices to the United States and the rest of the developed world, the economists predict. The sharp increase in world hunger isn't inevitable, however. The economists say increased conservation could do more to wean the United States from foreign oil than all the corn-based ethanol plants now online.

Corn and ethanol producers dispute the claims.

"Based on the numbers and the amount of ethanol we're producing, there's not a negative implication for corn destined for the rest of the world," Jeffrey Zeiger, executive director of the Alternative Fuels Institute, a nonprofit group in Watertown, S.D., said.

However, pork, poultry and egg producers are beginning to sound alarms of their own about ethanol's impact on food prices. Some aspects of the scenario laid out by Runge and Senauer already are coming to pass. This winter's imposition of tortilla price controls in Mexico in an attempt to quell unrest is an early indication of the consequences of food price shocks, the two write.

Ethanol plants are on pace to consume more than 35 percent of the U.S. corn crop within a few years and their growth rate has attracted the notice of food producers. Those food producers rely on corn in the production of everything from cereals to butter and meat.

Richard Bond, president and CEO of chicken producer Tyson Foods, said last week that the country must "carefully consider the negative and unintended consequences of over-using grains" for fuel. "Companies will be forced to pass along rising costs to their customers, meaning consumers will pay significantly more for food," Bond said. "If left unaddressed, the bigger long-term issue will be the availability of U.S. and global grain for protein and other foods."

Zeiger of the Alternative Fuels Institute rejects the argument that hunger will rise worldwide as the use of biofuels increases. U.S. food prices are bound to rise in the short term as millions of tons of corn are diverted to new ethanol plants, but new technologies for producing ethanol from other crops will ease the need for corn.

The tortilla, staple of Mexican cuisine, has become the nexus of a far-reaching trade and energy dispute. A surge in U.S. ethanol production has led to a near-doubling of corn prices, so Mexican President Felipe Calderon recently put caps in place on the skyrocketing price of corn tortillas.

U.S. programs subsidizing ethanol production from corn are money down a rathole. In his State of the Union address Jan. 23, President Bush recommended a reduction in U.S. gasoline usage by 20 percent over the next 10 years and called for a large increase in ethanol production to make up the difference. However, producing corn from ethanol — the favored U.S. approach — is an ecological and economic disaster.

A gallon of corn-based ethanol provides only 1.3 times the energy required to produce it. This compares with sugarcane-based ethanol, which provides about eight times the energy required to produce it, soybeans at three times, or switchgrass at four times. The subsidies required to embark upon mass corn-based ethanol production only compound the problem.

Because the U.S. climate is not conducive to mass production of sugar-based ethanol, it should allow imports from places where efficient production is possible. Already, ethanol imported from the Caribbean is tariff- and duty-free, up to 7 percent of total domestic use. But most of these nations are too small to produce enough for export, and imports from large producers, such as Brazil, must undergo costly sugar-cane transport to other nations for processing to qualify.

That still leaves Mexico as a viable option. The large swaths of humid, tropical land in its south would be ideal for sugarcane, and its proximity to the U.S. would reduce transport costs. It is also a member of NAFTA.

Rising tortilla prices in Mexico are due to a supply issue in that country -- not increased U.S. ethanol production or U.S. corn prices. The U.S. Grains Council (USGC) and the National Corn Growers Association (NCGA) report that lower corn production in Mexico and the lack of import licenses have caused white corn shortages there.

Additionally the country experienced a 1.2 million metric ton (47.2 million bushel) reduction in corn yields due to drought in 2006. Mexican farmers produced 22.5 million tons (885.8 million bushels) of both white and yellow corn in 2005, whereas production dropped 5 percent to 21.3 million tons (838.5 million bushels) in 2006.

"While it is true that higher yellow corn prices in the United States have had an impact on domestic yellow corn prices in Mexico, it should also be noted the price of white corn in Mexico has increased," said Ken McCauley, NCGA president. "What's important to realize, however, is that this is not an ethanol issue. Domestic and global demand for U.S. corn has driven the price up. In the end the markets will even everything out."

Mexico is a substantial customer of U.S. corn -- having imported 10.5 million tons (413.4 million bushels) in the 2006 calendar year. However, of that volume, only 253,000 tons (10 million bushels) was white corn. In addition, recent numbers released from the U.S. Department of Agriculture state world corn production will increase by about 5.2 million tons (204.7 million bushels) over January's estimates.

The National Corn Growers Association's mission is to create and increase opportunities for corn growers. NCGA represents more than 32,000 members and 46 affiliated state organizations and hundreds of thousands of growers who contribute to state checkoff programs. For more information on NCGA, log on to http://www.ncga.com.

Many Democrats and some Republicans applauded President Bush's State-of-the-Union proposal for a 20 percent reduction in gasoline use during the next 10 years, largely through greater reliance on ethanol.

Bush's idea, however, is adding corn-based fuel to protests in Mexico City. Existing federal laws that mandate ethanol in U.S. gasoline have diverted trainloads of corn from America's food supply-chain to ethanol factories. This boosted U.S. corn prices nearly 80 percent in 2006.

That's bad enough if you buy corn on the cob for a weekend barbecue. But it's much worse if you are a poor Mexican surviving on corn tortillas. A kilo (2.2 pounds) of tortillas recently has shot up 55 percent, from 5.5 to 8.5 pesos. Poor Mexicans are not taking this sitting down.

How has American energy policy inspired political instability in Mexico? This is a pristine example of The Law of Unintended Consequences. When big government does big things, all sorts of wacky stuff happens, and rarely for the good.

Uncle Sam gives ethanol manufacturers a 51-cent-per-gallon subsidy. Anyone who wants to import ethanol is welcome to, provided he pays the 54-cent-per-gallon tariff slapped on ethanol imports. This is one reason for another unintended consequence: gasoline prices shot up last summer since ethanol, largely produced in the Midwest, had to be shipped south and to both coasts to be blended, by law, with gasoline. Importing Brazilian ethanol into Atlantic and Pacific ports would have made sense, but then-House Speaker Dennis Hastert, R-Ill., hated the idea, since that would put competitive pressure on his corn-farming constituents.

"I don't see an economic plus in it right now," Hastert sniffed.

Second, as fuel companies buy more and more corn, prices will rise for corn flakes, corn bread, popcorn, corn syrup and other food items. Grocery bills should grow, at least marginally.

Third, humans eat corn, but so do cows, pigs and chickens. Meat prices will rise, hurting U.S. consumers and making American meat exports less competitive on world markets.

Fourth, if they have not already, members of the Federal Reserve Open Market Committee will notice these increases in consumer and producer prices. Fearing inflation, they could start increasing interest rates. That would slow the economy and push into foreclosure more Americans with variable home mortgages.

This economic damage will accelerate if President Bush promotes, or if the federal government mandates, a one-fifth drop in gasoline use by 2017. According to estimates by Cato Institute scholars Jerry Taylor and Peter Van Doren, writing in the Winter 2007 issue of The Milken Institute Review, "If all the corn produced in America in 2005 were dedicated to ethanol production .Ê.Ê. it would have reduced U.S. demand for gasoline by, at most, 12 percent." So, to reach Bush's 20 percent goal, corn production must grow to 167 percent of its 2005 levels, and every kernel must go into ethanol. Kiss your corn pudding goodbye.

Cultivating that much corn will require even more farmland. Securing it likely will require chopping down the same trees that inhale the carbon dioxide that humans and cars exhale. If Al Gore is telling the truth, this will increase global warming. So, one of the environmentalists' favorite tools for fighting global warming actually could exacerbate it. Meanwhile, as the Wall Street Journal editorialized on Jan. 27, "ethanol increases the level of nitrous oxides in the atmosphere and thus causes smog."

Get ready to pay $4.50 a gallon this summer -- for milk. Gasoline prices over $3 a gallon have grabbed consumers' attention, but dairy products and other corn-dependent foods are expected to rise at an even faster rate.

This is happening because of an explosion in the production of ethanol, a gasoline additive touted by the president, automakers and farmers as a way to reduce America's dependence on foreign oil.

Up to 20% of the nation's corn crop -- 18% in Michigan -- is now being channeled to ethanol production. That increased demand means the price of corn used to feed cattle and pigs and to make cereals and sweeteners is going up -- 61% between September and May.

Together with the rising costs of wheat and other commodities, corn demand is pushing overall food prices up 4% this year, compared with 2% a year ago, and driving up the costs of breakfast foods -- eggs, bacon, cereal, milk and potatoes -- as much as 10%, according to the U.S. Bureau of Labor Statistics.

Chris Galen, a spokesman for the Arlington, Va.-based National Milk Producers Federation, predicts that the price of a gallon of reduced (2%) fat milk in metro Detroit, which started the year at $2.97 and is now around $3.08, could spike another $1.50 a gallon by the fall.

Nationally, ethanol production rose from 2.14 billion gallons in 2002 to nearly 6 billion gallons in 2006. Corn to produce ethanol grew from 996 million bushels in 2002 to 2.2 billion bushels in 2006.

Michigan farmers, who produce 280 million bushels of corn a year, mirror the nation by committing 18% of their crops to make 213 million gallons of ethanol a year. The proportion of Michigan corn going to ethanol is expected to reach 35% by 2010.

A study released in May by Iowa State University, paid for by several food-production groups including beef, pork and poultry producers, said ethanol production has added $14 billion a year to U.S. food costs, and predicted the total could reach $20 billion annually. It said putting more land into corn production -- which some groups consider environmentally risky -- would provide only modest help.

Ethanol, an alcohol-based fuel that is produced from corn, soybeans and other agricultural products, has been around for 100 years, and is being blended with gasoline in ratios from 10% to 85%. It was the first fuel to power Henry Ford's Model T prototype.

Midwestern farm interests began lobbying in the 1970s for incentives to produce ethanol as a way to reduce U.S. dependence on oil -- and to create a new market for corn. Persistence and political muscle have paid off as production has boomed.

Ethanol already has a 51 cents-per-gallon federal subsidy, so corn producers in Michigan and across the country are clamoring to get into the game.

Corn belt states such as Iowa, Nebraska, Illinois and Minnesota have led the way in ethanol production. But in the past five years, four ethanol refineries have been built in Michigan, with another seven in construction or being proposed. The state has created 20 agriculture renaissance zones, which offer tax incentives for companies to build ethanol and other renewable energy facilities.

What’s the connection between ethanol, the biofuel produced from corn, and a cherry vanilla ice-cream? Answer: the first is responsible for pushing up the price of the other.

This month, the price of milk in the United States surged to a near-record in part because of the increasing costs of feeding a dairy herd. The corn feed used to feed cattle has almost doubled in price in a year as demand has grown for the grain to produce ethanol.

Amy Green’s Ivanna Cone ice-cream emporium in Lincoln, Nebraska, has already raised its prices for a small cone to $3.50 before tax, up from $2.95 a few months ago. She also estimates that she is paying $150 more a week for the butterfat that she uses in her ice-cream.

The squeeze on ice-cream makers, chocolate manufacturers and pizza companies – all of whom use dairy produce as a raw material – is set to tighten as the price of a gallon of milk in the US – up 55 per cent in the past 12 months in some American states – is now the same as a gallon of petrol, with dairy prices accelerating faster than the cost of fuel.

Prices for dairy products have also risen because of increasing demand from China and the Middle East along with the drought in Australia, reduced subsidies in the European Union and the rocketing cost of corn.

A surge in the production of biofuels derived from corn, wheat and soyabeans is helping to push up food prices so sharply that the World Food Programme, the United Nation’s agency in charge of fighting famine, is finding it difficult to feed as many hungry people as it has in the past.

Food commodity prices are surging because of a number of factors including rising demand from China and bad weather, but the potential consequences of the rising demand for biofuels has caught the attention of those in the business of feeding the world.

Mark Spelman, head of Accenture’s global energy practice, said the biofuel industry was at risk of creating a public backlash similar to wind power generation as food inflation continues. “*Windpower was a very popular renewable source of energy until a wind-farm was planned in someone’s backyard*,” he said.

Rising prices for food have led the United Nations programme fighting famine in Africa and other regions to warn that it can no longer afford to feed the 90m people it has helped for each of the past five years on its budget.

The World Food Programme feeds people in countries including Chad, Uganda and Ethiopia, but reaches a fraction of the 850m people it estimates suffers from hunger. It spent about $600m buying food in 2006. So far, the WFP has not cut its reach because of high commodities prices, but now says it could be forced to do so unless donor countries provide extra funds.

She said policymakers were becoming more concerned about the impact of biofuel demand on food prices and how the world would continue to feed its expanding population. The warning could re-ignite the debate on food versus fuel amid concerns biofuel production will sustain food inflation and hit the world’s poorest people.

The WFP said its purchasing costs had risen “almost 50 per cent in the last five years”. The UN organisation said the price it pays for maize had risen up to 120 per cent in the past sixth months in some countries.

Biofuel demand is soaking up grain production as is rising consumption in emerging countries for animal feed. “We face the tightest agriculture markets in decades and, in same cases, on record,” Ms Sheeran said. Global wheat stocks have fallen to the lowest level in 25 years, according to the US Department of Agriculture. Ms Sheeran added: “We are no longer in a surplus world.”

Ethanol is driving up the price you pay for popcorn. "Ethanol is the cause of the high popcorn prices," said Charles Cretors of C. Cretors & Co. in Chicago, which makes and supplies popcorn popping machinery to the snack-food industry and movie theaters.

Here's why: Popcorn differs from field corn, a commodity used in livestock feed, food additives and ethanol. But the price popcorn farmers receive stays above the price of field corn, which at more than $3 per bushel is up 37 percent from a year ago as production of corn-based ethanol soars. The reason: Popcorn requires more care than field corn, and popcorn processors pay farmers a premium for it.

Alan Teicher, who owns two theaters in Troy, raised popcorn prices 25 cents to a range of $4.25 to $5 in anticipation of a 13 percent hike in the price he pays for popcorn. "That's the largest increase I've ever heard of," said Teicher, who's been in business for 39 years and notes the $1.70 increase in Ohio's minimum wage also has cut into profits. "We can only absorb so much of these increases before we pass them on to the customer."

National Amusements, parent company of Showcase Cinemas, and Kroger have no immediate plans to raise popcorn prices, according to spokeswomen.

Starbucks Corp will raise U.S. prices on coffee, lattes and other drinks by an average of 9 cents a cup next week to help offset soaring costs for milk and other commodities, a spokesman said on Monday.

The widely anticipated move marks Starbucks' second price increase in less than a year and comes a month after the coffee shop chain's chief financial officer warned it would be "very challenging" for Starbucks to meet the high end of its 2007 earnings forecast, in part because of rising dairy prices.

U.S. milk prices have soared recently amid strong global demand for dairy products and higher production costs.

Up to 20% of the nation's corn crop -- 18% in Michigan -- is now being channeled to ethanol production. That increased demand means the price of corn used to feed cattle and pigs and to make cereals and sweeteners is going up -- 61% between September and May.

Together with the rising costs of wheat and other commodities, corn demand is pushing overall food prices up 4% this year, compared with 2% a year ago, and driving up the costs of breakfast foods -- eggs, bacon, cereal, milk and potatoes -- as much as 10%, according to the U.S. Bureau of Labor Statistics.

Americans are fanatics about coffee. Threaten it with a tax like Seattle tried back in 2003 with the Espresso Tax that would have helped kids, and just watch the public galvanize against the idea. Not surprisingly, the tax got voted down. But what about the kids?

Big Coffee said no way.

In the November 2002 election, Berkley, California residents rejected an issue that would have required every coffee shop in Berkley to sell fair trade, organic, or shade-grown coffee. Like I said before, shade-grown is better for the environment in the coffee growing regions.

You'd think that an allegedly progressive area like Berkley would overwhelmingly support helping the environment and helping farmers in the coffee-growing regions. Doesn't this seem like the kind of thing that would begin in Berkley? But nooo. Berkely has no problem telling the rest of us how to live, but when a good issue directly affects them in the pocketbook, they say no way.

The big evil, Starbucks, doesn't brew all their coffee with organic, shade-grown, fair trade coffee because it would hurt their profits.

I'm not advocating espresso taxes and legislation dictating how a business operates, but it's just funny to watch how some groups support taxes and restrictions on some products for the good of the human race but not on others even though such a tax or law would supposedly be helpful.

I've always felt that the most powerful group in the U.S. is coffee drinkers. All demographics drink coffee.

Three years ago, Toledo's own Clamor Magazine published an article about fair trade coffee.

Bread price increase

“Wheat surpasses $9 a bushel for the first time pushing global stock piles to a 26 year low”

“Weather damage to global crops has driven up prices in Chicago by 79 percent this year”

-Bloomberg Press, September 12th 2007

“Wheat stocks worldwide are being depleted and grain prices are soaring”

-New York Times, September 12th 2007

You've probably seen the headlines. Pretty frightening for bakery owners to read. Here’s what’s happened:

For the second year in a row there have been very poor wheat crops in the US, Canada and Australia.

This year there is tremendously higher than normal demand from India and China for US wheat.

Wheat farmers have been encouraged to switch from growing wheat to growing corn because of the high price paid for corn for the production of ethanol.

Cattle farmers have not been able to secure corn to feed their stock and have chosen to buy wheat instead further heightening the shortage of wheat.

In a word, the price of flour has skyrocketed. We're not just seeing it on the news and in the papers, but on our flour invoices too. Over the last year and a half we have seen flour costs rise from $8 per 50 Lb. bag to more than $13 per bag. That's a 62% increase in our number one bread ingredient.

As a result of these price increases we made a very difficult decision to raise our bread prices as of Monday, October 8th, 2007. To give you some idea, the increase on most of the loaves is $1.

Wheat futures gained in Chicago on expectations demand is increasing at a time of shrinking global stockpiles. Corn and soybeans declined as recent advances may have been overdone.

Corn reached a nine-month high yesterday at $4.4325 a bushel, while soybeans extended a rally to the highest since 1973 on speculation that U.S. demand for fuel made from grain and oilseeds will surge. The Senate passed a bill Dec. 13 that may boost use of alternative fuels such as ethanol and biodiesel.

The most-actively traded ethanol contract in Chicago gained 1 percent yesterday. ``Further appreciation in ethanol is bullish for the corn market,'' Dan Cekander, analyst at Fimat USA, said in a report yesterday.

FOR as long as most people can remember, food has been getting cheaper and farming has been in decline. In 1974-2005 food prices on world markets fell by three-quarters in real terms. Food today is so cheap that the West is battling gluttony even as it scrapes piles of half-eaten leftovers into the bin.

That is why this year's price rise has been so extraordinary. Since the spring, wheat prices have doubled and almost every crop under the sun—maize, milk, oilseeds, you name it—is at or near a peak in nominal terms. The Economist's food-price index is higher today than at any time since it was created in 1845 (see chart). Even in real terms, prices have jumped by 75% since 2005. No doubt farmers will meet higher prices with investment and more production, but dearer food is likely to persist for years.

That is because “agflation” is underpinned by long-running changes in diet that accompany the growing wealth of emerging economies—the Chinese consumer who ate 20kg (44lb) of meat in 1985 will scoff over 50kg of the stuff this year. That in turn pushes up demand for grain: it takes 8kg of grain to produce one of beef.

But the rise in prices is also the self-inflicted result of America's reckless ethanol subsidies. This year biofuels will take a third of America's (record) maize harvest. That affects food markets directly: fill up an SUV's fuel tank with ethanol and you have used enough maize to feed a person for a year. And it affects them indirectly, as farmers switch to maize from other crops. The 30m tonnes of extra maize going to ethanol this year amounts to half the fall in the world's overall grain stocks.

With agflation, policy has reached a new level of self-parody. Take America's supposedly verdant ethanol subsidies. It is not just that they are supporting a relatively dirty version of ethanol (far better to import Brazil's sugar-based liquor); they are also offsetting older grain subsidies that lowered prices by encouraging overproduction. Intervention multiplies like lies. Now countries such as Russia and Venezuela have imposed price controls—an aid to consumers—to offset America's aid to ethanol producers. Meanwhile, high grain prices are persuading people to clear forests to plant more maize.

Rising incomes in Asia and ethanol subsidies in America have put an end to a long era of falling food prices.

Not surprisingly, farmers are switching, too: they now feed about 200m-250m more tonnes of grain to their animals than they did 20 years ago. That increase alone accounts for a significant share of the world's total cereals crop. Calorie for calorie, you need more grain if you eat it transformed into meat than if you eat it as bread: it takes three kilograms of cereals to produce a kilo of pork, eight for a kilo of beef. So a shift in diet is multiplied many times over in the grain markets. Since the late 1980s an inexorable annual increase of 1-2% in the demand for feedgrains has ratcheted up the overall demand for cereals and pushed up prices.

Because this change in diet has been slow and incremental, it cannot explain the dramatic price movements of the past year. The second change can: the rampant demand for ethanol as fuel for American cars. In 2000 around 15m tonnes of America's maize crop was turned into ethanol; this year the quantity is likely to be around 85m tonnes. America is easily the world's largest maize exporter—and it now uses more of its maize crop for ethanol than it sells abroad.

Ethanol is the dominant reason for this year's increase in grain prices. It accounts for the rise in the price of maize because the federal government has in practice waded into the market to mop up about one-third of America's corn harvest. A big expansion of the ethanol programme in 2005 explains why maize prices started rising in the first place.

Ethanol accounts for some of the rise in the prices of other crops and foods too. Partly this is because maize is fed to animals, which are now more expensive to rear. Partly it is because America's farmers, eager to take advantage of the biofuels bonanza, went all out to produce maize this year, planting it on land previously devoted to wheat and soyabeans. This year America's maize harvest will be a jaw-dropping 335m tonnes, beating last year's by more than a quarter. The increase has been achieved partly at the expense of other food crops.

This year the overall decline in stockpiles of all cereals will be about 53m tonnes—a very rough indication of by how much demand is outstripping supply. The increase in the amount of American maize going just to ethanol is about 30m tonnes. In other words, the demands of America's ethanol programme alone account for over half the world's unmet need for cereals. Without that programme, food prices would not be rising anything like as quickly as they have been. According to the World Bank, the grain needed to fill up an SUV would feed a person for a year.

America's ethanol programme is a product of government subsidies. There are more than 200 different kinds, as well as a 54 cents-a-gallon tariff on imported ethanol. That keeps out greener Brazilian ethanol, which is made from sugar rather than maize. Federal subsidies alone cost $7 billion a year (equal to around $1.90 a gallon).

In theory, what governments mandate, they can also scrap. But that seems unlikely with oil at the sort of price that makes them especially eager to promote alternative fuels. Subsidies might be trimmed, of course, reducing demand occasionally; this is happening a bit now. And eventually, new technologies to convert biomass to liquid fuel will replace ethanol—but that will take time. For the moment, support for the ethanol programme seems secure. Hillary Clinton and John McCain used to be against ethanol subsidies, but have changed their minds. Russia and Venezuela are not the only countries that like to meddle in food markets for political reasons.

But overall, enormous numbers of the poor—both urban and landless labourers—are net buyers of food, not net sellers. They have already been hard hit: witness the riots that took place in Mexico over tortilla prices earlier this year. According to IFPRI, the expansion of ethanol and other biofuels could reduce calorie intake by another 4-8% in Africa and 2-5% in Asia by 2020. For some countries, such as Afghanistan and Nigeria, which are only just above subsistence levels, such a fall in living standards could be catastrophic.

Forget the $100 barrel of oil. Get ready for the $10 six-pack. A shortage of hops and increasing demand for barley are driving the current price increases.

Part of this is due to the push for corn-based ethanol: acreage formerly planted with hops or barley is being converted to corn, a crop currently selling at historically high prices. Farmers are going to grow whatever fetches the most money, and skyrocketing hops and barley prices are an example of the secondary effects of what has widely been viewed as a magic bullet in a world of also rising fuel prices.

Barley makes up about 80 to 90 percent of what goes into every batch of beer, Bratrud said, and barley prices have risen from about 35 cents a pound to more than 50 cents. While there is no shortage of barley at present, competition for the grain for livestock feed as corn prices have escalated is driving prices higher.

The situation is further compounded by Anheuser-Busch buying up supplies of Cascade hops, a distinctive variety that is very popular with both microbreweries and homebrewers.

“Prices climb, but they never drop,” said Park. “That’s what happened to tequila when there was a major shortage of agave. Tequila prices jumped quite high and they never came down. I’m afraid the beer industry is going to be the same way, where it goes up and it stays up. In my eight years here, I’ve never seen dropping beer prices.”

After nearly two decades of low food inflation, prices for staples such as bread, milk, eggs, and flour are rising sharply, surging in the past year at double-digit rates, according to the Labor Department. Milk prices, for example, increased 26 percent over the year. Egg prices jumped 40 percent.

Escalating food costs could present a greater problem than soaring oil prices for the national economy because the average household spends three times as much for food as for gasoline. Food accounts for about 13 percent of household spending compared with about 4 percent for gas.

As with energy, higher food costs cut into discretionary income that buys everything from cars to computers to movie tickets and drives the consumer-based US economy. Falling home values and a faltering stock market have battered consumer confidence, spurring a retrenchment in spending that is contributing to recent job losses and pulling the economy toward recession.

Several factors contribute to higher food prices, analysts say, but none more than record prices for oil, which last week closed above $105 a barrel. Oil is not only driving up production and transportation costs, but also adding to demand for corn and soybeans, used to make alternative fuels such as ethanol and biodiesel.

As a result, corn prices have more than doubled in commodity markets over two years, and soybeans nearly tripled, according to DTN, a commodities analysis firm in Omaha. Meanwhile, with poor harvests in major wheat-producing regions, wheat prices have more than tripled.

These crops have a profound impact on food prices because they form foundations for many products, including oils, sweeteners, and flour. Corn, for example, is a key ingredient in livestock feed. When the price of corn rises, so does the price of feed, and ultimately, so do the prices of meat, poultry, and eggs.

Darin Newsom, senior analyst at DTN, said the same dynamics pushing oil prices to new highs are at work in agricultural commodities. They start with strong global demand, growing as living standards improve in developing nations such as China and India and food consumption increases.

With food and fuel prices soaring, the United Nations agency charged with feeding the world's hungry has launched an "extraordinary emergency appeal" to cover costs and avoid having to cut aid, a senior official said Monday.

The World Food Program called on donor nations for urgent help in closing a funding gap of more than $500 million by May 1. If money doesn't arrive by then, Executive Director Josette Sheeran said in a letter to donors, the WFP may be forced to cut food rations "for those who rely on the world to stand by them during times of abject need."

The poorest face hunger as people around the world are being "priced out of the food market," Sheeran told reporters Monday in a conference call.

Citing food prices that had ballooned 55% since June, the WFP disclosed a $500-million shortfall Feb. 25, and the gap has continued to grow ever since, Sheeran said.

The Rome-based WFP feeds at least 73 million people in nearly 80 nations with an annual operating budget of $2.9 billion.

"We've never quite had a situation where aggressive rises in food prices keep pricing operations out of our reach," Sheeran said.

In the letter, Sheeran noted that the WFP had attempted to reduce its costs by turning to local and regional markets to buy up to 80% of the food it disburses, a share that grew by 30% over the previous year.

"This not only saves on food and transport costs but is a win for local farmers, helping to break the cycle of hunger at its root," she wrote. "But even with our mitigation efforts, the cost of our food purchases has risen 55% since June 2007" and an additional 20% since Feb. 25. "Such increases show no sign of abating any time soon."

In addition to being hit by spiraling costs of grains and other staples, WFP operations have been hurt by record-high fuel prices and other transport costs.

Food commodities are becoming more expensive because of rising demand in developing countries, natural disasters and climate change, and the shift of millions of tons of grains to the production of biofuels.

The United States is the largest single contributor to the WFP, accounting for about 40% of the agency's food and money donations, followed by the European Union. U.S. officials have already warned that it is likely they will be cutting donations to global humanitarian organizations because of higher costs.

Sheeran said that the people at greatest risk are those who live on $1 a day or less, but that officials are also bracing for what the U.N. is calling the "new face of hunger." These are people who may have access to food but can no longer afford to buy it.

Aid organizations around the world face budget shortfalls because of a rise in global food prices. The Rome-based World Food Program will have to reduce food shipments to disaster-hit places such as Darfur unless it can close a $500 million deficit.

Food prices have soared 55% since June alone, according to the WFP. The higher costs have resulted from rising oil prices, the use of crops for biofuels and skyrocketing demand for food in developing economies such as China and India.

The amount of food aid delivered abroad by the U.S. government has fallen 43% from 2002-07, according to a report by the Government Accountability Office.

The report blamed the decline in part on soaring transportation costs and inefficient management by U.S. aid agencies. It said nearly two-thirds of the $2 billion the United States spends every year on food aid — far more than any other country — goes to transportation, storage and handling costs.

The Bush administration has sought to modify a 1954 law requiring all such aid to be donated in food rather than cash and mandating that the food be grown on American soil.

Those rules prevent U.S. agencies from following the example of other organizations in Europe and elsewhere, which have tried to cut costs by buying cheaper crops from countries that are closer to the areas in need.

Harry Edwards, a spokesman for the U.S. Agency for International Development, said buying food from third-party countries could save up to 25% of ocean shipping costs alone.

But in a move that has led to the US, UK, Australia and Canada not yet endorsing the report, the authors said GM technology was not a quick fix to feed the world's poor and argued that growing biofuel crops for automobiles threatened to increase worldwide malnutrition.

The authors of the 2,500-page International Assessment of Agricultural Science and Technology for Development [IAASTD] say the world produces enough food for everyone, yet more than 800 million people go hungry. "Food is cheaper and diets are better than 40 years ago, but malnutrition and food insecurity threaten millions," they write. "Rising populations and incomes will intensify food demand, especially for meat and milk which will compete for land with crops, as will biofuels.

The unequal distribution of food and conflict over control of the world's dwindling natural resources presents a major political and social challenge to governments, likely to reach crisis status as climate change advances and world population expands from 6.7 billion to 9.2 billion by 2050."

The authors also warned that the global rush to biofuels was not sustainable. "The diversion of crops to fuel can raise food prices and reduce our ability to alleviate hunger. The negative social effects risk being exacerbated in cases where small-scale farmers are marginalised or displaced form their land," they said.

At a glance

Bio-energy The report says biofuels compete for land and water with food crops and are inefficient. They can cause deforestation and damage soils and water.

Biotechnology The use of GM crops, where the technology is not contained, is contentious, the UN says. Data on some crops indicate highly variable yield gains in some places and declines in others.

Climate change While modest temperature rises may increase food yields in some areas, a general warming risks damaging all regions of the globe. There will be serious potential for conflict over habitable land.

Trade and markets Subsidies distort the use of resources and benefit industrialised nations at the expense of developing countries.