Leading article: Rising food prices... the low-cost chicken is coming home to roost

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The Independent Online

If anyone remains to be convinced that food prices are on the way up, this week provided evidence aplenty. Premier Foods, Britain's biggest food producer, warned that the days of cheap food were ending, citing the almost doubling of wheat prices in 12 months. It was among several companies announcing a steep rise in bread prices.

Then Tesco, our biggest supermarket chain, responded to a rival's rock-bottom chicken price by actually raising prices for similar chickens on the grounds that a further cut could only jeopardise quality. And the UN's most senior agriculture official said that soaring prices for wheat, corn and milk globally could cause serious social unrest in developing countries.

There are many reasons why prices are rising, and at least some are perversely positive. Chief among them is increased demand. And demand is increasing because the population, and living standards, across much of the less developed world are rising. Better diet, particularly in China and India, has fuelled demand for dairy products – and driven up the global price of milk.

There is also the push for more environmentally friendly sources of energy. This has made ethanol the fuel of the moment, encouraged by government subsidies. The downside is that maize and sugar cane have been diverted from food production to fuel, squeezing the quantities available for food. The pressure on maize has in turn raised demand for wheat, with predictable results.

Negative factors include the extreme weather – more frequent flooding and droughts – caused by global warming, and the subsidies that the rich world, specifically the United States and EU countries, dispenses to its farmers. These distort the workings of the market and penalise producers in the poorer countries, who find their access to the international market blocked.

Understanding why prices are rising, however, is one thing. Getting to grips with the consequences is quite another. In Britain we have become more used to cheap food than almost anywhere in the industrialised world outside the United States. Our spending on food has fallen from 30 per cent of household income to 10 per cent in just three decades. Arguably, though, we have paid in other ways.

Cheap food has been made possible by intensive farming and by the big retailers exercising their buying power. In many case, though, quality has suffered. We have become accustomed to food that is often cheaper but also of worse quality – in terms of freshness, nutritional value and taste – than that enjoyed by our European neighbours. We also buy much more processed food, which contains the additives whose deleterious effects on children's well-being were highlighted this week.

More expensive food could encourage some beneficial changes: a shift from processed food to fresh, for instance; greater interest in local sourcing, and a much-needed reduction in waste. If higher prices were paid to farmers, this could also reduce the pressure from the agriculture lobby to retain subsidies.

When the head of Tesco, Sir Terry Leahy, introduced the supermarket chain's new policy on chicken pricing, he said he believed a fundamental shift was in progress in the priority that consumers placed on food. He also stressed that increased concern for quality was not restricted to affluent customers. If this is true – and Sir Terry's antennae have served him well in the past – we could finally be grasping the truth that cheap food has a price.