Wednesday, September 05, 2007

An "environmental tax on food"

Premier Foods, the makers of Hovis, are blaming the push by governments to turn crops into biofuels for an "unprecedented" surge in global wheat prices.

This is according to The Times, which tells us the group had just increased bread and flour prices for the second time this year, with Tesco putting up the price of a 800g loaf of Hovis up by 8p to more than £1. It was 88p last summer.

Robert Schofield, chief executive of Premier Foods, is calling the price rise a "green tax", saying that the group had no choice but to force through an increase. Wheat prices had doubled in the past year to £200 a ton after a series of poor harvests and Britain's wet summer.

James Harding, the business editor, takes up the story, warning that the price rise is a harbinger of higher food prices to come. It is not only wheat that is increasing in price. The price of corn, rice and barley have all risen by over a third since 2005. After the long slump in commodities prices, the world is waking up to agflation.

Harding suggests that there are three causes of increasing costs of foodstuffs. First, demographics: the populations of India and China not only account for roughly 2.4 billion people, and rising, but also a rapidly expanding middle class with the money to fund larger appetites. Second, climate change: extreme hot and cold weather has resulted in unpredictable harvests, which have contributed to the depletion of wheat stocks to their lowest levels in 25 years.

Third is biofuels: the response to climate change, namely the reallocation of huge acreages previously used to grow corn for animal feed and human consumption to grow corn and sugar for ethanol, has robbed the world market of vast tracts of food-producing farmland.

Premier Foods, he says, could not explain yesterday which of these three factors was having the most impact on wheat prices. The most immediate cause, it said, was biofuels: "What you have is an environmental tax on food."

This of course, is nothing to what we will see if the EU goes ahead with its ten percent target for biofuels. If it does go ahead with this madness, inflationary pressures will not only intensify, we will face the real prospect of a shortage of basic foods.

The one good thing, though is then, perhaps people might wake up to the dangers presented by "green politics" and our continued membership of the EU. It would be worth going a little hungry for that.


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