Rich But Hungry.(Special Report)(food crisis affecting western Europe)

Byline: William Underhill; With Barbara Kantrowitz In London, Tracy Mcnicoll In Paris And Barbie Nadeau In Rome

The food-price shock is now trickling up to wealthy nations where consumers have been shielded so far.

Italians love their pasta. According to pollsters, more than half would prefer a good plateful of the stuff to sex. But every passion has its limits. Over the past year, the price of pasta in the country's stores has climbed nearly 20 percent, quite high enough to suppress the strongest appetites. Last year consumer groups staged a one-day boycott on pasta purchases in protest at the hikes; now shoppers have begun to seek cheaper alternatives. A recent study from the Confederation of Italian Farmers found that pasta sales fell 2.6 percent in 2007. Demand for bread had tumbled, too; down more than 6 percent. Instead, there's been a growing demand for eggs and chicken. In the words of the report: "In a time of austerity shoppers are looking for low-cost protein."

As the price of staple foods continues to soar on world markets, it's not only the developing countries that are feeling the pinch. Sure, there's little risk of starvation in North America or Europe, where less than 15 percent of the typical household budget goes on groceries (compared with 50 percent or more in the poorest parts of the world). But cost-conscious consumers in weakening economies are well aware of the doubling of the cost of wheat that makes their bread sometimes 30 percent more expensive. In the 15-nation euro zone, annual food-price inflation is running at 6.5 percent, the highest figure since record-keeping began in 1997. Across the Atlantic it's reckoned that a record 28 million Americans will need food stamps this year, up 1.5 million on last year, and everywhere, politicians are struggling to supply answers to a problem that looks set to worsen. Anthoula Madden, a consumer-affairs expert at global business consultancy Capgemini, says, "When you look across Europe and America, what you see is a gathering storm."

So far, the food industry has shielded customers from the worst effects. "The manufacturers have managed to absorb much of the extra cost," notes Madden, "but in the end we are going to see it ripple down the food chain." That means extra grief for the poorest segments of society, who spend the largest fraction of their incomes on food. Already, cash-strapped consumers are dropping old loyalties in pursuit of bargains. In Britain, where the average family is now paying $30 a week more for their food than in 2007, the cut-rate supermarket group Netto saw revenues climb 11 percent last year. It now claims to be the fastest-growing chain in the country. By contrast, shares in the upmarket U.S. grocery chain Whole Foods fell more than 10 percent last year.

In rich countries as in poor, food is a key reason behind the run-up in total inflation figures. In the euro zone, ...