In July 2007, Nestlé, the world’s largest food company, warned that food prices were set for a period of “significant and long-lasting” inflation,¹ and the investment bank Goldman Sachs similarly said that the world is entering a period of “sustained inflation in agricultural products.”² Indeed, there are signs of agricultural product inflation (or “agflation”) all around. The International Monetary Fund (IMF) recorded a 23% overall rise in food prices during the 18 months prior to summer 2007,³ but some key agricultural commodities have been rising at a much faster rate. World wheat prices, for example, rose about 85% in the period between December 2005 and summer 2007;⁴ corn rose around 60% in the year prior to summer 2007, rice increased 50% and cattle more than 40% between 2005 and 2007;⁵ and just in the five months leading to July 2007, the world price for skimmed milk rocketed by almost 60%.⁶ By spring 2008 rice,⁷ wheat, and corn had all surged a further 50% compared with the previous summer.⁸

This agflation is a significant break with the post-WWII food-price pattern. Beginning with the 1950s, cultivated land has increased by roughly 11%. Also, the “Green Revolution,” which generated new strains of crops and more use of fertilizer, pesticides, and irrigation, resulted in greatly increased yields. From 1950 to 1990, world grain production rose by an average 2.1% per year,⁹ which more than offset the demand from a rising world population and hence led to falling prices in real terms.

More recently, however, a convergence of factors has upset this benign situation. To begin with, in the last 15 years, yields have been rising more slowly as the gains to be had by adding more fertilizer have started shrinking, and irrigation has had increasing competition from other demands for water by a growing population. So crop yields are rising by less than 1% per year—half the annual increase in worldwide demand for grain and below global population growth of 1.3% per year.¹⁰ Even more significantly in the last two or three years, because of rising oil prices and concerns about global warming, crops like sugar and corn (maize) are now being diverted from food into the production of ethanol for fuel. According to one estimate, corn used in fuel production in America is set to rise from 6.4% of U.S. corn production in 2001 to 30% by 2007/2008¹¹ (and will rise significantly more given President Bush’s 10-year target for biofuel production).¹² This has led to falling world corn stocks (at a 33-year low)¹³ and rising prices, but wheat prices have also risen as farmers have diverted their wheat acreage to corn production. And to worsen the wheat-price picture, drought has done much damage to this staple in Argentina and Australia, and demand is soaring in China and India.¹⁴

Furthermore, the prosperity of formerly poor countries, especially China, is changing the market. People are switching away from a diet mainly based on rice and vegetables to one which includes lots of meat. The growth in beef and chicken consumption in China is currently running at 20% per year,¹⁵ and the Organisation for Economic Co-operation and Development expects worldwide beef consumption to rise by a third by 2015.¹⁶ Since it takes a bushel of corn to produce 19.6 pounds of chicken, just 13 pounds of pork, and a mere 5.6 pounds of beef,¹⁷ a worldwide growth in beef consumption is going to put major pressure on grain prices in the future. And all this is against a background of growing urbanization, removing more land from farming. It looks as if rising food prices, particularly of grains, are going to get very much worse in the future.¹⁸

All this is beginning to hit the poor in the West hard, but it is as nothing compared with the situation in the poorer countries of the world, where people are seeing their staple foods priced out of their reach.¹⁹ In March 2008 World Bank president Robert Zoellick called for urgent action on the part of rich nations, “or many more people will suffer or starve.”²⁰ The compassionate Church should respond by doing what it can to offer hunger relief through its charitable agencies and programs. But there is a second lesson here: God’s people must be wary of trendy public policy initiatives. As we examine in more detail elsewhere, the ethanol option has its costs—when a nation decides to “burn food,” someone, somewhere, might go hungry.

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