411man
07-19-2007, 09:01 PM
Nestlé Chief Fears Food Price Inflation
By Geoff Dyer in Beijing
Published: July 5 2007 22:02 | Last updated: July 5 2007 22:02
Food prices are set for a period of “significant and long-lasting” inflation because of demand from China and India and the use of crops for biofuels, according to the head of Nestlé .
Peter Brabeck, chairman of the world’s largest food company, said rises in food prices reflected not only temporary factors but also long-term and structural changes in supply and demand.
“They will have a long-lasting impact on food prices,” he told the Financial Times during a visit to China.
Several food companies have warned about the short-term outlook for prices, but Mr Brabeck’s comments are among the starkest warnings that a long period of rising food prices could stoke broader inflationary pressures.
Mr Brabeck said Nestlé had first forecast higher food prices two years ago and price pressure had become apparent last year.
Corn prices have risen about 60 per cent and wheat about 50 per cent over the last 12 months. Sugar, milk and cocoa prices have also surged, prompting the biggest increase in retail food prices in three decades in some countries.
The Nestlé chairman cited population growth, rising demand from “the phenomena of India and China” and the use of food products by biofuel producers as causes of pressure in international food markets.
Reports from two international organisations this week forecast food price rises of between 20 and 50 per cent over the next decade.
But some analysts believe the long-term risk of higher food prices is exaggerated. Julian Jessop, chief international economist at Capital Economics in London, said biofuels producers would develop technologies that required less raw material or used non-edible parts of food.
“There are good medium-term reasons to think that the biofuels price shock will pass,” he said.
By Geoff Dyer in Beijing
Published: July 5 2007 22:02 | Last updated: July 5 2007 22:02
Food prices are set for a period of “significant and long-lasting” inflation because of demand from China and India and the use of crops for biofuels, according to the head of Nestlé .
Peter Brabeck, chairman of the world’s largest food company, said rises in food prices reflected not only temporary factors but also long-term and structural changes in supply and demand.
“They will have a long-lasting impact on food prices,” he told the Financial Times during a visit to China.
Several food companies have warned about the short-term outlook for prices, but Mr Brabeck’s comments are among the starkest warnings that a long period of rising food prices could stoke broader inflationary pressures.
Mr Brabeck said Nestlé had first forecast higher food prices two years ago and price pressure had become apparent last year.
Corn prices have risen about 60 per cent and wheat about 50 per cent over the last 12 months. Sugar, milk and cocoa prices have also surged, prompting the biggest increase in retail food prices in three decades in some countries.
The Nestlé chairman cited population growth, rising demand from “the phenomena of India and China” and the use of food products by biofuel producers as causes of pressure in international food markets.
Reports from two international organisations this week forecast food price rises of between 20 and 50 per cent over the next decade.
But some analysts believe the long-term risk of higher food prices is exaggerated. Julian Jessop, chief international economist at Capital Economics in London, said biofuels producers would develop technologies that required less raw material or used non-edible parts of food.
“There are good medium-term reasons to think that the biofuels price shock will pass,” he said.