More pupils are rejecting healthy dinners, putting at risk the school meals service in Denbighshire, councillors have been warned.
Demand for fast food is 40% higher than healthy meals
A report said the service is "no longer financially viable" with servings 100,000 down on last year.
It is thought the problem lies with healthy meals because demand rises by 40% on the days fast food is served in primary schools.
Rising costs for fresh vegetables and fish are also adding to pressures.
The Denbighshire Council report, due to be discussed by councillors on Thursday, reveals most primary schoolchildren no longer use the service.
Head of environmental services Steve Parker said: "The service has moved into a loss-making position and there is a clear danger that we have entered a downward spiral that might be difficult to escape from.
"If the service collapses, the recovery costs will fall on the lifelong learning directorate. These costs are likely to be substantial."
The council's catering service was more than £81,000 in the red last year.
Celebrity chef Jamie Oliver has been campaigning for schools to be allocated more money to provide healthier meals.
But Denbighshire's report claimed its increased use of fresh vegetables has pushed the cost of meals well above inflation.
Jamie Oliver wants healthier school meals, but Denbighshire says they are expensive
It also said even modest price rises could lead to a disproportionate drop in the number of pupils eating school dinners.
Roughly one in seven of Denbighshire's primary school children have given up school meals in the past three years and the take-up rate is now about 48%.
Mr Parker added: "It is therefore true to say that there is no control whatsoever of the nutritional content of the meals consumed by the majority - 52% - of primary schoolchildren within Denbighshire."
Councillor Eryl Williams, cabinet lead member for environment, said: "The increased use of fresh ingredients, along with our decision to ensure that local meat is used, led to an increase in costs which was well above inflation.
"The cost of groceries rose by £29,000 last year and more was paid for meat. Over the same period the number of pupils taking schools meals has dropped."
Councillor Dewi Owens, cabinet member for lifelong learning, said: "One of the things is that we haven't had any money from the Welsh Assembly Government towards this."
The council's environment scrutiny committee is to consider options for providing a viable school meals service.
The council wants the service subsidised by at least £120,000.
An assembly government spokesman said they were committed to banning unhealthy food from schools, and the issue of funding was due to be discussed as part of the forthcoming budget negotiations.
He said about £20m had been allocated this year to support action on a plan relating to food and fitness for the young.