Global food abundance no longer guaranteed as biofuels compete,

Global corn stocks have fallen to the lowest level since modern records began as ethanol plants gobble up output and demand balloons in China, early evidence that the era of global food abundance may be nearing an end. Corn (maize) inventories have fallen to just 40 days' consumption in America, according to the US Department of Agriculture, beneath the record low reached in 1973. The average is 88 days.

Corn prices have doubled since the middle of last year, with ripple effects spreading to other crops that compete for scarce land. The soaring cost of animal feed has in turn pushed up meat and dairy prices worldwide.

Michael Lewis, head of commodities research at Deutsche Bank, said grain prices still had much further to rise, predicting a long catch-up rally over coming years after lagging behind metals and oil in the early phase of the boom. "Fundamentals have been tightening ever since 2001, but now we're hitting critically low levels of stocks. We're seeing very big structural shifts in the world and this is going to make farmland much more expensive in the future," he said. "Shortages are emerging in places like India, which has become a net importer of wheat for the first time since 1975. We expect China to become an importer of corn by late 2008."

Urban sprawl is eating up swathes of China's most fertile land on the eastern seaboard. Crucially, the country's 1.3bn people are switching steadily to a high-protein diet as they become wealthy, following the pattern seen in Japan, Taiwan, and South Korea. China's annual meat consumption is now 6kg per capita, compared with 13kg for its richer neighbours, so it is still likely to double again. Perversely, animal protein diets use much more grain. As a rule of thumb, it takes 10kg of animal feed - mostly corn in China - to produce 1kg of meat.

Supply is diminishing from the United States, source of 70 percent of the world's corn. America has switched a fifth of its corn harvest to ethanol as part of a strategic drive to cut dependence on oil from the Middle East. The figure was just 4pc in 2000. While farmers across the prairies are planting corn to reap windfall gains, this entails a cut in acreage of other crops.

Even on a cyclical basis, Deutsche Bank says the corn boom remains young, far behind the 237pc rise from June 1972 to October 1974. Grain prices would have to jump 230pc from current levels to reach the 1970s peak in real terms. The question is whether the gathering food boom is a classic late-cycle symptom of inflation pressures, or something deeper, and possibly more ominous.

Experts say food output can be raised in the Black Sea area, parts of Brazil and Africa, but arable land is not easily available. The world population will peak around 2040 but for now it is growing by 73m a year. Thomas Malthus, who predicted more than two centuries ago that population would outrun food supply, may yet enjoy a posthumous vindication, but farmers at least can smile.

Daily Telegraph