Rather than panicking about food shortages and increased prices, the government needs to rise to the challenge of food and fuel demand

We are living in a period of enormous change, and there is a lack of understanding in the scientific, NGO and food-processor community about the dynamic nature of arable farming. Farmed goods respond to economics and the reality of current prices is that we are now seeing an expansion of crop planting and can therefore expect to see increases in supply over the next few years.

John Beddington, chief scientific advisor to the government, recently said: "The price of wheat, rice, corn and oil has increased substantially over the past seven to eight years, and looks likely to continue in the short term.''

His assertion that grain prices are rising ignores the cost of production. With higher prices come increased planting and production, and the possibility of a supply response. World agriculture has not faced a sustained increase in prices in the past 40 years, so we don't know what that supply response will be.

Because food use is specific, short-term demand tends to be fairly rigid, meaning price moves are volatile and very sensitive to any supply dislocation. Removing volatility from the market comes at a price. In Europe we established intervention and threshold prices, providing a relatively narrow trading range, and commerce benefited from this, albeit at relatively high base prices. Now we have a globalised market without controls so if companies want to reduce the volatility of their raw material costs, they have to do this at their own expense using market derivatives.

Agriculture is an industry with slow lead times. Historically, forward contracting has been difficult and this engenders a mentality of feast and famine as supply/demand imbalances interact. Crop yields have always been difficult to predict as weather and agronomy produce surprises.

Low prices depress rural economies and discourage innovation and development, while higher prices bring these benefits to farming around the world, improving security of supply. The current crisis in the wheat market has everything to do with supply shortfalls brought about by weak prices and difficult weather. Arable agriculture has always provided the supplies demanded of it, and I believe UK, EU and world agriculture can rise - sustainably - to the challenge of food and fuel demand. This is the challenge governments and NGOs must address rather than generating anxiety about disappearing food supplies.

The debate about food and fuel supplies, which started off as a scientific discussion, is degenerating into an unseemly squabble dominated by self interest. As individuals, we seek reliable information about the fundamental issues but what we receive are often distorted, biased positions designed to suit a 'lobby position'. If we want to tackle food and fuel security and climate change, we must get beyond that.

Ultimately, the current food 'crisis' may well encourage reduced waste, improved efficiency of diet and a stronger world agriculture, based on demand rather than government. In a world running short of resources and with an obesity problem, these seem to be positive rather than negative outcomes. Those in the food industry must work together with NGOs to develop the methodology of sustainability. If we are to feed the rising world population this is the most important issue facing us all.n

Alastair Dickie, Director of Crop Marketing, HGCA