The Economist has a great special this week about "The End of cheap Food" (essay and an article). Highly recommended.

There are several forces at work:

One is simply demand and supply. For years farmers in Europe have been over subsidized and told to use their lands to overproduce even more food. Now with need these extra capacities back. Since the production of biofuels is so heavily subsidized as well – demand has made it for example more lucrative to sell wheat for fuel production instead of making pasta (here some background on the state of Wheat production worldwide).

Most of all food production is distorted: for decades now poorer countries with an agricultural base had no chance of competing against European and American farmers – because they are heavily subsidized. Sometimes local production has been so damaged by the price difference that they had to close – so these poor countries actually had to import food they could have easily produced themselves.

What we need is curbed up production in all countries, less subsidies and more sensible production. It makes no sense to transport milk from Europe to China. That’s a lot of fuel wasted – fuel which gets more and more expensive.