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Nestle Chairman Claims Biodiesel Is Causing Higher Food Prices
18th August 2012
Peter Brabeck-Letmathe, Nestle chairman has expressed concerns over the production of bio-diesel saying that it is putting pressure on food supplies. Land and water that would otherwise be used for growing crops is now being used for the production of biofuels, which is thought to be the catalyst for an influx in food prices.
Mr Brabeck-Letmathe commented, "The time of cheap food prices is over. If no food was used for fuel, the prices would come down again - that is very clear.
"We are now in a new world with a completely different level of food prices because of the direct link with fuel."
He continued to say that biofuels are affordable due to the high subsidies they receive, which is "absolutely unacceptable and cannot be justified. There is one demand that I have, and that is not to use food for fuel."
Mr Brabeck-Letmathe believes that the food and oil markets are the same; something that he feels is not understood by politicians, describing both markets as calorific. He said: "The only difference is that with the food market you need 2,500 calories per person per day, whereas in the energy market you need 50,000 calories per person."
In his statement, published by the BBC, Mr Brabeck-Letmathe said:
- Replacing 20% of fossil fuels with biofuels resulted in crop production having to increase threefold
- A large proportion of the world's sugar production effectively goes to the biofuel industry
- Agriculture uses 70% of world's water and Mr Brabeck-Letmathe urges that the public are made aware of this inefficient usage
"It takes about 4,600 litres of water to produce one litre of pure ethanol if it comes from sugar, and it takes 1,900 litres of water if it comes from palm oil. This is not a crisis which might arise in 100 years, it is something which is already here today."
The beliefs of Mr Brabeck-Letmathe are also reflected in the chairman of US food conglomerate Cargill, Paul Conway's statement. However, he has stated there are other reasons that are causing high food prices. "The bigger picture globally is increased urbanisation, which leads to more food being consumed."
Mr Conway also stated that within the decade leading up to the financial crisis, diets were improved as hundreds of millions of people were lifted out of poverty and were opting for meat. This along with a 20% decline in agriculture investment has contributed to the food prices we see today. "There has also been an explosion in biofuel use and the financialisation of the agricultural markets."
Although there has been a drop in food prices, Mr Conway believes that this will be short lived saying: "In the last five months we lost roughly 100 million tonnes of crops, largely in South America and most recently in the US grain belt, which has been dealing with 100 degree temperatures.
"So we have seen maize prices go up 40% and soya bean prices rise by 25% - so it is not a time to relax.
"Ultimately most of those crops are converted into other things, such as sweeteners, particularly in the US, or into animal feed, which later results in higher meat prices.
"We saw decade after decade of declining food prices in real terms, and if that gets to a level where there is not a sufficient return for farmers then you won't get the increase in production to feed the increase in demand.
"There needs to be a fair price both for farmers as well as consumers. It is the judgement of Solomon as to what that price is. Our view is let the market decide.
"We have seen occasions in the last few years where a government's reaction to that has been to do things like introduce export bans, or cap maximum prices.
"It is understandable they are doing that to protect essentially the urban poor, to keep prices down."
Mr Conway concluded that this temporary decline in food prices had a detrimental effect on farmers as they were pressurised to cut their prices to remain competitive. He also stated that arable land in Africa should be used more productively.
"Brazil is now a powerhouse. What has happened in Brazil in the last 20 years needs to be replicated in Africa.
"Farmers need clarity of tenure, better infrastructure, better markets for their produce - and when you provide that sort of environment, you will see an increase in production."
This article has been written and submitted to OilFiredUp.com by RPM Fuels & Tanks.