If you read the minutes of the Reserve Bank board’s 5 February meeting or the Statement on Monetary Policy produced six days later, there’s lot of discussion of inflation, interest rates, capacity constraints, rising wages and solid retail sales, but little in the way of discussion on food price inflation.

That is now a major concern in the US and Europe, as well as China, India and other fast-growing economies. A combination of falling stocks, droughts and the rise of ethanol and biodiesel production, plus rising living standards and changing eating habits in Asia, is driving the worries.

Unlike in Australia, where the Reserve Bank is worried about inflation and wages being driven by shortages of capacity and labour, overseas the real concern is inflation driven by rising energy and food costs. The policy statements from the European Central Bank, the US Fed and the Bank of England have all mentioned it in recent months.

On top of record or near record prices for coffee, tea, dairy products, cocoa, vegetable oils such as palm oil and an upturn for sugar, copper, gold, platinum and oil also hit record highs or are near their all-time highs after an across-the-board rise last night.

Oil finished above $US100 a barrel in New York. Only one cent over, but it was the first time it has closed above this level after hitting a new intra day high of $US100.10 a barrel. Traders said it was the result of a mixture of supply and sentiment factors, but also strong interest from financial investors (speculators).

Wheat closed at $US10.47 in Chicago, under the all-time high of just over $US11 a bushel, while corn, soybeans and other agricultural commodities were stronger on rumours that China’s bad snowstorms had damaged its important canola (rapeseed) crop. That was denied in a rare Government statement on rapeseed production which detailed minor losses, according to news agencies.

Reports that China will be looking for extra supplies drove prices for Malaysian and Indonesian palm oil and European rapeseed to record levels overnight. China’s rising food needs have seen the prices of all vegetable oils rise, especially canola and palm oil which are also being chased by biodiesel producers in Asia and Europe.

Europe has a policy of wanting more energy from non-fossil fuel sources quickly and is actively promoting biodiesel from canola, but in the process it is driving up prices and making the biofuel uneconomic — the same is happening with palm oil in Asia.

Coffee, cocoa and tea markets are also coming to the boil with prices at or near their highest levels for at least a decade or more.

The price of Arabica coffee, the highest quality bean, has risen 36% in the past year; cocoa prices hit a 24-year high in New York last week on drought concerns in the Ivory Coast, the major producer (that’s a 45% rise in a year). Coffee stocks are now the lowest on record.

And tea prices have jumped sharply following the unrest in Kenya after December’s disputed election. The UN Food And Agricultural Organisation said yesterday that wholesale tea prices rose 6.5% last year to an annual average of $US1.95 a kilogram, the highest annual level since 2002, and will continue to rise this year as Kenyan production is reduced by the unrest.

In the US, traditionally the “food bowl” of the world, bakers’ associations and big wheat consumers have appealed to the Government to limit the export of high quality grain after prices for bread making wheat hit a record $US19.88 a bushel on Friday.

That’s a 300% rise in a year, driven by the drought in Australia, the surge in US wheat exports in recent months, rising demand from India and China and the drop in output because more and more US growers are switching to corn for the ethanol industry (while soybeans will attract attention this year).

Bread wheat has a premium compared to the price of soft wheat and companies like Kelloggs have already blamed the soaring grain prices for lower earnings, as has Kraft, where a 40% rise in the cost of milk and other dairy products has cut profits and growth in its cheese products.

Dairy prices have been at or near record prices internationally for a year or more, meaning more money for farmers in New Zealand and the US but not so much in Europe where quotas remain in force. Again it’s the drought in Australia and rising demand from Asia driving dairy prices higher.