GLOBAL FOOD PRICE INFLATION
I agree entirely with Nestlé's Chairman and a growing chorus of others about food prices rising again in the future.
The fundamentals have indeed shifted. Food prices had been falling for years, through greater industry efficiency and generally improved management of the world's economies.
Recently, there have been a series of developments that add up to a material reversal. Some of the key factors are:
- Accelerating demand from emerging economies, most notably China and India.
- Climate change putting pressure on fossil fuels and food production predictability.
- A surge in the use of crops for biofuels, particularly in Brazil.
Biofuels are the biggest step change for a generation. Their consequences could be as far reaching for food as for energy. Their subsidies certainly need reviewing in the light of this impact and a better understanding of their full costs alongside their full benefits.
Even without biofuels, however, food prices would still be rising. The latest forecasts are for increases of 20-50% over the next ten years. I regret I concur. But much of this will go to production and distribution, while manufacturer and retail margins continue to be squeezed.