Washington: As US diverts grain to produce ethanol to fuel cars food prices have begun rising the world over.

A report by the Earth Policy Institute (EPI) said corn prices have doubled over the last year; wheat futures are trading at their highest level in 10 years and prices of rice are rising.

The report said by 2008, close to one third of the US grain harvest will be going to ethanol, reducing the amount available both for internal use and for export. The world's breadbasket is fast becoming the US fuel tank the institute said.

The Institute further said that unless Washington restricts the grain used for fuel, it faces not only a consumer revolt at supermarket checkout counters at home, but also spreading political instability in low- and middle-income countries on a scale that could disrupt global economic progress, it said.

The Institute concluded by saying that creating chaos in world grain markets is totally unnecessary. Raising auto fuel efficiency standards 20 per cent would reduce oil use as much as converting the entire US grain harvest into ethanol.