America's worst drought in half a century, poor harvests in Russia and Ukraine, and Britain's washout early summer will all push up the costs of basic staple foods such as bread and pasta, while rising animal feed prices will send the price of meat soaring, experts are warning.

Shoppers are already feeling the pinch, according to mySupermarket.co.uk, which compares prices at the major retailers. It said minced beef is up 19% over the past year, while peas, carrots and potatoes are up by 4%-8% – though some of this is due to seasonal factors. Overall, global food prices rose by 6% in July, according to the UN.

America's searing summer, which has seen temperatures hit 43C (110F) day after day, has left the once-rich cornfields of the Midwest brown and shrivelled. The worst-hit farmers are reporting corn harvests of just a 10th of the previous year. It is estimated that, in total, 45% of the corn and 35% of the soya bean crop has been destroyed.

The impact on family budgets, already hit by a steep rise in train fares and near-record petrol prices, could be severe, with economists nervous it will further delay any economic recovery.

Food prices table Photograph: Graphic

But while the crops are withering, speculators are rubbing their hands. At Glencore, the world's biggest commodities trader, the head of its food trading business said this month that the US drought will be "good for Glencore" because it will lead to opportunities to exploit soaring prices. The Swiss and Jersey-based dealer in wheat, corn, oil and copper, made a profit of $2.3bn (£1.5bn) in the first half of 2012.

It's not just big traders that have jumped on the food price bandwagon. Small investors are being encouraged to use exchange traded funds (ETFs) that track the price of individual commodities, and where minimum investments are as low as £2.

Trawl the internet and you'll find articles such as "How to invest for the global food crisis" by Seeking Alpha, which claims it is home to "savvy and inquisitive investors". At InvestorDaily, the headline is "Food stocks whet investors' appetites", while over at Nasdaq it's "Six agriculture ETFs on a roll". So far this year the ETF for soya beans is up 44%, wheat is ahead 34% and corn is up 25%.

But Friends of the Earth Europe is calling for a ban on institutional speculation in food commodity derivatives and commodity ETFs. "The hunger of people must come before the hunger of financial in stitutions," it says.

Make Finance Work, a group of organisations committed to alternative solutions to the global economic crisis, is pressing the European parliament to control food price speculation when it votes next month on proposed reforms to financial regulation under the Markets in Financial Instruments Directive (Mifid). It's calling for consumers to sign a petition aimed at MEPs on its website. "If done right, it could protect the world's most vulnerable from the whims of Europe's big financial players," campaigners say.

"But the MEPs, whose votes are vital, are being heavily lobbied by the financial industry. We need to tell MEPs to vote to end excessive food speculation, and put the hunger of people before the greed of banks."

A German lobby group, Foodwatch, last month claimed success in its campaign against speculation after Commerzbank removed agricultural products from its ETF offering.

"It is reacting to the debate about a series of studies which show that investment in this type of commodity fund pushes food prices upwards and so contributes to the hunger crisis in many parts of the world," Foodwatch says. Last year, Deutsche Bank also said it would "refrain from launching new staples-based exchange traded products this year."

But Fidelity Investments, the biggest fund manager, says investors should be looking at agribusiness stocks, such as fertiliser companies and farm machinery makers, as the solution to the world's food challenges. In a recent research note "Food: from crisis to crisis", Fidelity highlighted World Bank estimates that demand will rise by 50% by 2030. Much of that will be driven by population growth and a big shift in Asian diets to more meat and dairy products. This has a significant knock-on effect on grain demand as it takes 7 kilos to produce 1 kilo of meat.

Fidelity reckons there could be a "second green revolution" as increased fertiliser usage improves yields in Africa and Asia. It tips fertiliser companies such as Potash Corp, Uralkali and Mosaic as potentially star stocks.

Currently, British investors have a number of specialist agricultural funds to choose from including Allianz RCM Global Agricultural Trends, Baring Global Agriculture, Eclectica Agriculture, First State Global Agribusiness and Sarasin Agrisar.

James Govan, manager of the £132m Baring Global Agriculture fund, says: "The things we are investing in are about expanding food supply, such as fertilisers, drought-resistant seed, irrigation equipment and so on."

Although volumes are down in America, farm incomes are up because of rising prices, which has sparked an investment boom. It's one reason why Govan is a holder of stocks such as tractor maker John Deere, whose share price has more than doubled over the past three years.

But despite the rise in global food prices, the agricultural funds have had surprisingly weak performance. Baring's fund is up just 4.6% over the past year, Sarasin 9.7%, First State 6.2% and Allianz 3.6%. Eclectica's fund has fallen 2%. In contrast, the average fund in the UK All Companies sector is up about 16% over the past year.

The hot money suggests there will be a fall in agricultural prices rather than a drought-inspired rise. According to ETF Securities, there has been an outflow of $622m from agricultural ETFs in the past year, much of it in recent months. Meanwhile, the ETFs which short agricultural prices – in other words, they bet on a fall in prices – are seeing inflows.

Says Nick Brooks of ETF Securities: "Many investors built up positions in agricultural ETFs a year to 18 months ago, but have been selling this year. A lot of investors view agricultural prices as too high, are selling their long positions, and some are going short."