Agflation: Drought, oil send food prices soaring

The Australian: Grain prices have hit record levels, and those prices will ramify through the feed chain - beef, dairy, pork, eggs and chicken -- and reach consumers. The nation's food bowl, the Murray-Darling basin, does not have enough water in the system to keep 150,000ha of citrus, apples, pears, apricots, plums, cherries, table grapes and winegrapes alive, let alone in production. Fruit production in the basin is worth more than $1.5 billion and accounts for 60 per cent of Australian-grown fruit.

Australian Horticulture Council chief executive Kris Newton says the severe cutback in irrigation water could result in price rises, as seen with bananas after Cyclone Larry. "But that will be across all the commodities," Ms Newton said. "We are facing a disaster unprecedented in Australian history. I can't think of anything in agriculture that comes even close."

…Australian Dairy Farmers policy director Robert Poole says agriculture is going through its most profound change in modern history. "The whole oil price, climate change, food for fuel scenario -- that has changed the world forever," Mr Poole said. "The linking of agriculture land and its use to the price of energy, in the medium to long term, will radically change the way the world works.

…Australian Lotfeeders Association president Malcolm Foster has been campaigning against mandated ethanol in petrol. "It is putting extreme pressure on the world grain prices, because of what the US has done," Mr Fraser said. "Our concern was Australia would do it and put pressure on Australian prices, but it is happening in the US anyway. The impact is going to be quite severe on food prices around the world."

Blair Trewin from the National Climate Centre says 2007 has been the worst post-drought year on record. "Not only was 2006 a severe drought year, but 2007 in many areas is unprecedentedly poor." Dr Trewin says climate change, particularly rising temperatures, has made climate forecasting more difficult. "Our outlooks are based on historical relationships between sea surface temperatures and rainfall and temperatures," he says. "We are not as confident as we once were that those relationships are still stable."

…Ms Newton says the effect of the dry will be felt in the cities. "Whether it is in the hip-pocket nerve, whether it is in terms of unemployment in regional communities, it will be felt across the nation," she said. Mr Keogh said: "I don't think anyone in their wildest dreams would have imagined a problem on this scale."