Wheat was fetching the unprecedented price of $7.54 a bushel yesterday, according to the Chicago Board of Trade, as Canada warned of a 20 per cent smaller harvest and import-reliant Japan and Taiwan moved fast to shore up stocks. The International Grains Council is predicting a seven million tonne shortfall in wheat supply to meet demand in 2007-8, as it downgraded its harvest estimates to 607m tonnes. According to the Financial Times of London, food industry group are warning that there will be short term spikes in meat, poultry and dairy prices as animal feed costs are passed on to consumers. Food industry executives warned that meat, poultry and dairy prices would climb in the short term as farmers and processors pass on costs. Alex Waugh, director-general of the UK Flour Milling Association, said: "Wheat costs for flour millers in the UK now stand some £500m higher than last year. This has yet to come through in wholesale or consumer prices." Rising food prices have been attributed to surging interest in biofuels, provoking an ethical debate over whether it is appropriate to use grain for fuel when people in poor countries are starving. But consultancy Frost & Sullivan said in a market insight published this week that although pasta prices have been on the up, for wheat "the link to ethanol production is less tangible at present". Food producers can pass on high crop prices to consumers, whereas biofuel producers do not have the same luxury, according to Frost & Sullivan, which says price will ultimately be the regulating factor in the market. But report author Robert Outram concluded: "Certainly there is a place for biofuels in the global energy market, but food will always come first." In June the Chinese government imposed a ban on grains needed for food production being used for biofuels in that country. The Frost report calls the relationship between animal feed, food for human consumption and biofuel feedstock a delicate one, and said that there are many factors influencing price and demand. To some extent in the feed sector there is flexibility to substitute one grain for another, cheaper one if prices become prohibitive in this least-cost driven market. But in food the same is not always possible. For instance, corn prices have driven up the cost of the staple food tortilla in Mexico, and poorer people have had to go without.