"Middle class could ditch organic food to cut bills", screamed headlines last month after warnings that food inflation could get worse.

Consumers have been hit with conflicting stories about the rate of food inflation, but whether the rate is 2%, 6%, 9% [The Grocer puts it at about 7%] or something else altogether, there's no doubt that shoppers are feeling the pinch.

When the AA announced that diesel prices had risen by the highest margin this century, it also said 17% of households were planning to cut back on food spending as they attempted to mitigate the higher cost of filling up their fuel tanks. Historically, organic shoppers have been typically more steadfast in their commitment to ethical purchasing - and accepting of the price premium that goes with it.

Organic suppliers seem fairly confident that other areas of discretionary household spending will suffer first. Soil Association commercial director Jim Twine does not believe there will be a significant switch away from organic - rather the reverse.

"Will the credit crunch mean that people stop buying organic? Definitely not," he says. "Rather than go out for a meal, people will buy good food to cook at home."

Despite the appeal of organic meat, Richard Cullen, category development manager for meat services at the Agricultural and Horticultural Development Board, expects organic meat sales to stay flat unless the economy picks up.

"We're starting to see evidence that consumers are trading down from premium to value," he says.

However, the credit crunch could hit the organic market's core AB shoppers - middle-class families with huge mortgages and school fees to pay, and a four-by-four on the driveway, warn some experts.

"It's a complex balancing system," says Martin Caraher, reader in food and health policy at City University, London. "Price is still a huge driver, even in organics. We salve our consciences by buying organic or Fairtrade, but usually that's when you have some level of affluence."

According to TNS, 65% of consumers would be "more inclined" to buy organic if it was cheaper.

But, while consumers would clearly welcome lower prices, manufacturers are finding themselves under mounting pressure to increase on-shelf prices due to growing costs. Raw material costs have soared over the past few months.

Lise Madsen, founder of Honeyrose Bakery in West London, received just 14 days' notice of a 60% hike in butter prices.

"All our raw materials with the exception of sugar have gone up," she says. "For seven years we were able to maintain prices on much of our range. Now, just a year after putting prices up, we have had to review things and do another increase on half the range."

Muesli producer Alara has also seen increases in the price of key ingredients.

"Organic produce has not escaped lightly," says MD Alex Smith. "Organic ingredients are very expensive and, in some cases, impossible to find. There is no organic rye left, and no organic goji berries or organic strawberries."

Smith reports a doubling in the price of sultanas, oats and sunflower seeds, while linseeds have risen by 150%, apricots 80%, and hazelnuts 50%.

"More or less everything is up dramatically this year. There is a growing consensus that the higher prices will be here for good," he adds.

With organic meat typically commanding a premium of 60% to 100% over non-organic, it is potentially more vulnerable to belt-tightening by consumers. Despite the pressure of higher prices, manufacturers are trying desperately hard not to pass on rising costs to consumers.

"We are working hard to ensure that our premium branded organic meat products stay within the price range of our customers," says Tim Finney, managing director of Helen Browning's Organic Meat, which supplies Sainsbury's, Tesco and Budgens. "We have seen no drop in sales as budgets tighten, although growth is slightly slower."

Finney says the company is used to absorbing cost increases from time to time, and is currently working on reduced margins.

"Our prices have held steady since summer 2007, and it's interesting to see the gap between our branded products and the other premium ranges narrowing," he adds.

The possibility of a better harvest this year could help stabilise raw material prices. But unlike the conventional wheat market, where new crop prices have eased a lot since the peak, the forward organic market is holding on to the higher prices - effectively widening the already substantial difference between conventional and organic pricing.

"This differential now represents about 40p to 50p on the shelf price of a 1.5kg flour pack," says Doves Farm marketing director Clare Marriage. "We have put through some price rises but not enough to compensate for the cost increases we have had to accept on incoming grain."

Many manufacturers are confident that providing the quality is maintained, people will still pay more for organic food. Besides, the market may not be ready for cheaper organic food: if prices drop, demand could rise, contributing to further supply shortages.n