Nestle chair blames biofuels for food price inflation

Nestlé boss Peter Brabeck-Letmathe says the 'immoral' biofuel policy of the US is responsible for driving up food prices...

by Emma Haslett
Last Updated: 16 Jun 2015
In the week that soaring food prices helped push CPI inflation up to 4.4%, more than double the Bank of England's target, it was interesting to hear Nestlé chairman Peter Brabeck-Letmathe put forward the argument that the big increase in corn prices - which almost doubled in the year to February - is all the US government's fault. He reckons that by incentivising farmers to turn corn into ethanol, the US (which accounts for about 60% of the world's corn supply) is pushing up food prices and causing millions to go hungry. Naturally, the Obama administration begs to differ...

Brabeck-Letmathe made the claims during a speech at the Council on Foreign Relations in New York. He reckons more than a third of US corn now goes into making biofuels, which he says is pushing ‘hundreds of millions of people into hunger and into extreme poverty’ - because it's reducing the supply of corn that can be used for food. And since demand is soaring, partly to feed animals that we can then eat, that's pushing up the price. Hence he thinks ethanol incentives are 'absurd' and 'absolutely immoral'.

Of course, Brabeck-Letmathe has a vested interest here: Nestle relies on corn to make many of its products, so keeping its price down is good for the company's margins. And critics will argue that Nestlé isn’t exactly squeaky-clean in CSR terms: this time last year, it was fending off accusations that elements of its supply chain were selling it palm oil sourced from trees grown by knocking down rainforests.

Equally, the Obama administration’s defence is that the likes of Brabeck-Letmathe (who is also on the board of L'Oreal and ExxonMobil) don’t understand the situation properly. Earlier this month, agriculture secretary Tom Vilsack described this line of attack as 'irritating', arguing that US farmers are ‘smart and innovative and creative enough to meet the needs of food and fuel’.

Of course, the reason the US is promoting biofuels is to wean the country off its dependence on fossil fuels, which bring their own risks and problems. But at a time of rising demand, it follows that unless farmers can keep boosting their supply, prices are going to go up. And that could have far-reaching consequences, particularly in the developing world.

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