Wednesday, July 25, 2012

Nestle blames biofuels for skyrocketing food inflation

You want to know why food prices are climbing all over the world? Well, the head of Nestle, the world's largest food manufacturer, says it's because we are increasingly burning our food for fuel. In fact, company chairman Peter Brabeck-Letmathe declared recently, we have begun to rely on food-produced biofuels so much that "the time of cheap foods is over." Brabeck-Latmathe is particularly critical of the rise in bio-diesel production because, he says, the process has put increasing pressure on food supplies by utilizing precious land and water resources that could otherwise be used to grow crops for human and animal consumption. "If no food was used for fuel," he told the BBC in an interview, "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. Biofuels, he maintains, are only affordable because they receive government subsidies, particularly in the United States. "It is absolutely unacceptable and cannot be justified," Brabeck-Latmathe asserted in the interview. "There is one demand that I have, and that is not to use food for fuel." Food, oil markets are 'calorific' Biofuel development and use in the U.S. initially was seen as a way to reduce the country's reliance on volatile foreign oil sources and, to a degree, that policy has been successful. But at the same time, as Brabeck-Letmathe points out, the increased use of biofuels is a double-edged sword. For instance, he maintains that politicians don't understand that the food and oil markets are the same in that they are both "calorific markets," the BBC reported. "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," he said. The Nestle chief said lawmakers and others unfamiliar with the process did not anticipate that to replace 20 percent of fossil-fuel use with biofuels, as they wanted, would require increasing crop production three-fold. The production increases have occurred in many cases, but the excess production is being burned off. As one example, Brabeck-Letmathe said most of the world's sugar production now goes into the manufacturing of biofuels. That's a growing problem, in part, he says, because agriculture accounts for some 70 percent of the world's water usage, making the growing of food strictly for biofuel production an incredibly inefficient use of a precious resource - at a time when the world's growing population needs more food for consumption. "It takes about 4,600 liters (about 1,215 U.S. gallons) of water to produce one liter of pure ethane oil if it comes from sugar, and it takes 1,900 liters (501 gallons) of water if it comes from palm oil," he said. "This is not a crisis which might arise in 100 years, it is something which is already here today," he added. Not everyone agrees, of course. Paul Conway, chairman of Cargill, the U.S.-based food conglomerate, also opposes mandate for biofuels. But he told the BBC other factors were driving up food costs. "The bigger picture globally is increased urbanization, which leads to more food being consumed," said Conway. Prior to the global financial crisis that began with the near-collapse of the U.S. banking systems and housing market in 2007-2008, hundreds of millions of people were being lifted out of poverty in the preceding decade. That phenomenon led to dramatically increased food demands as diets improved and more meat and poultry was consumed. Not time to relax "There has also been an explosion in biofuel use and the financialization of the agricultural markets," Conway said. Those factors, along with a 20 percent decline in agricultural investment, has contributed to higher prices. Food prices have dropped recently, Conway said, but those price declines won't last. "In the last five months we lost roughly 100 million tons of crops, largely in South America and most recently in the US grain belt, which has been dealing with 100 degree temperatures," he told the BBC. "So we have seen maize prices go up 40 percent and soybean prices rise by 25 percent - so it is not a time to relax." In the end, he added, "most of those crops are converted into other things, such as sweeteners, particularly in the U.S., or into animal feed, which later results in higher meat prices." Conway said 60 percent of the world's unused arable land is on the African Continent. Source -

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