The cost of the weekly food shop is being forced upward by global demand for cereals and dairy products.

Higher standards of living in China and India are driving inflation in food prices as a move to a more Western diet has led to a greater demand for meat and milk.

Warnings over continued higher food prices are now being given by industry leaders. Even though consumer price inflation fell to 2.5 per cent last month, from 2.8 per cent in April, the price of food is racing ahead and at 5 per cent is now twice the rate of inflation.

World prices for whole-milk powder, skimmed-milk powder and butter are at record levels. Skimmed milk powder now costs £2,433 a tonne compared with £1,013 a tonne last year. Butter is £1,292 a tonne compared with £912.

Lord Haskins, the former chairman of Northern Foods and a former rural adviser to Tony Blair, said: “Prices are going crazy and the money brokers are moving worldwide investing in arable land. China is the key driver to this, I believe. Exports of milk powder from New Zealand to China have gone up 60 per cent in a year and prices have been pushed up by 30 per cent.”

The problem has been exacerbated by severe drought in Aus-tralia and the United States and a growing trend for farmers to grow crops for fuel instead of food, which has caused a worldwide shortage of cereals and milk. Kevin Hawkins, director-general of the British Retail Consortium, said that consumers in Britain would have to brace themselves for higher food bills as demand worldwide was certain to outstrip supply and prices would have to rise. Peter Kendall, the president of the National Farmers’ Union, will also give warning in a speech today about higher food prices as more British and European farmers grow crops for bi-ofuel instead of food.

The price rises will come after a period of relatively cheap food – the share of household expenditure for food is now 8.9 per cent compared with 22.3 per cent 40 years ago.

But according to the latest figures from the Office for National Statistics (ONS), bread prices have risen by 8.1 per cent in a year, cereals are up 4.2 per cent, potatoes 11.3 per cent, fresh fruit 6.7 per cent, eggs 13.7 per cent, milk 11.7 per cent, fresh fish 12.5 per cent, vegetables 10.3 per cent and butter 3 per cent.

A spokesman at the ONS said that food inflation was driven in particular by the higher price of cereals, bread and fresh fruit.

Dr Hawkins said that further price rises might be inevitable for cereals, bread, vegetables, salad products, butter and other dairy items.

He said: “Obviously there is a worldwide demand for grains and if demand outgrows supply there will be an upward tendency for inflation. Much will depend on what happens this summer, not just in the UK but for overseas suppliers.”

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