June 17 2005 - After his American employers left and monthly food rations began to shrink, Hussein Hadi started selling his furniture. His bed was the last thing to go. Now Hadi, his wife, sister, mother, two brothers, three children and a nephew sleep on his living- room floor in Baghdad, their blankets sewn from flour sacks. Some nights they fall asleep hungry.

"Hope is small," said his wife, Zainab. Like many Iraqis, the Hadis depend on food rations distributed by the government. Sometimes the sugar they receive has been hardened by rainwater and the rice is crawling with maggots. The soap is so harsh it causes rashes. On the rare occasions when the Hadis received all the items - sugar, rice, flour, baby milk, tea, vegetable oil and a few other essentials - they thought themselves lucky.

The United Nations World Food Programme, which monitors the distribution of rations, recently reported "significant countrywide shortfalls in rice, sugar, milk and infant formula".

Families in Baghdad have received no sugar or baby milk since January. Newspapers have also begun reporting that the tea and flour hand-outs contain metal filings and that people have fallen ill after consuming food rations.

Officials with the trade ministry, which is in charge of distributing the rations, said the media have created the crisis. But they have refused to release results of the tests for contamination they said they are doing. Retail agents who sell the food baskets say the ministry is corrupt, a charge supported by Radhi Radhi, the government's anti-corruption chief.

Mr Radhi said in a recent interview that trade ministry officials had spread rumours of contaminated food to discredit the current flour supplier and renegotiate the contract. Some agents speculate that ministry employees have added metal filings to cheat on the parcels' weight. The same employees also sell tea and flour on the black market, agents say.

Like the Hadis, many Iraqi families rely on the heavily subsidised rations, which were previously distributed under the United Nations' oil-for-food programme to mitigate the effect of sanctions after the Iraqi invasion of Kuwait. After the removal of Saddam Hussein, the programme was handed over to the trade ministry.

More than half of Iraq's population lives below the poverty line. The median income fell from $255 (£144, €211) in 2003 to about $144 in 2004, according to a recent UN survey. Families buy the food baskets for a few dollars at state-licensed shops.

Ahmed Mukhtar, director-general of the ministry, blamed the shortage of rations on security threats that created bottlenecks at the borders with Jordan, Syria and Turkey. "We're attempting to make sure the supplies are safely delivered," Mr Mukhtar said. "Anything that disturbs the food supplies is a critical situation."

Zainab Hadi said she and other women had been forced to buy food at the market, pushing prices up. The cost of tea and flour has almost tripled. At food markets, a 35-pound can of vegetable oil, which just a few months ago cost $4 - a little more than an average day's wage - now costs $12. Mr Hadi recently lost his job as an electrical engineer with US troops and now works as a minibus driver.

Over the doorway of the Hadis' tiny house, a small blue ceramic plaque offers praise to God. The 10 family members share two rooms. The upstairs living room doubles as a bedroom. In their kitchen, a poster of the Shia Muslim martyr Hussein shares pride of place with a world map. The fridge is largely empty. Sprite and Coke bottles filled with tap water share shelf space with medicine to relieve the aching joints of Hadi's widowed mother.

In Sadr City, a Baghdad slum into which 2m people are crammed, the reduction in food rations is also taking a toll. Intisan Karim, 26, lives with 24 family members in a small house. If rations continue to shrink, she joked, laughing without mirth, "we'll start eating each other".

Outside sewage flowed along the streets; goats gnawed on rubbish.

"The food basket is shrinking and the people's hopes are also shrinking," said Amir Huseini, who dealt with social issues in an office affiliated with Moqtada al-Sadr, the anti-American Shia cleric.

"One or two missing items have become three, four and five, until this point when the really vital item - the flour - is also missing."

He had visited many families locally, trying to raise morale and hope, he said, "although this does not fill the stomachs of the hungry".

This article is published by special arrangement with the Los Angeles Times. Times staff writers Saif Rasheed and Suhail Ahmad contributed to this report