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Veteran Advisor

An intersting article on food policy. Oh yea they slam bio fuels.

11:41 UK, 26th January 2011, by Agrimoney.com
Price controls 'not the answer' to food inflation

Governments considering price controls, export bans or investing in crop futures to tackle soaring food inflation should think again, United Nations officials warned, as the head of Nestle forecast high bills may be here to stay.

The UN's Food and Agriculture Organisation cautioned that while buying crop futures might secure food supplies, it would "not solve the problem" of high world prices, which last month hit a record high, according to the group's own calculations.

"Having private importers or state import agencies engage in forward contracts for food imports may further exacerbate price escalation, as demand for the same supply of commodities is heightened," the FAO said.

Meanwhile, limits on food prices, as practiced by governments including China, Mexico and Russia, discourage traders from marketing crops, and farmers from growing more.

"When food prices are controlled, shortages are always the consequence."

'Serious negatives'

However, the organisation saved its deepest criticism for curbs by surplus-producing nations on food exports, warning of their "serious negative consequences" both for the country imposing them, which deters farmers from raising output, and for importers, which end up paying more.

The comments came as Peter Brabeck, the chairman of Nestle, the world's biggest food group, also lashed out at "arbitrary political decisions", such as bans on wheat or sugar exports, which shackled market movement.

Meanwhile, many governments are introducing measures to counter the food inflation which has sparked riots in Algeria in which three people were killed and 420 injured, and in Tunisia which ended in the ousting of the country's president.

Within the last week, Algeria, Bangladesh, Lebanon and Tunisia and have issued tenders to buy wheat, with the result of an Iraqi tender viewed as imminent, and Saudi Arabia widely expected to return to the market soon.

Meanwhile, countries such as Libya have cut custom duties to encourage food imports, while Morocco has implemented financial support for importers of soft milling wheat in an effort to keep supplies firm and prices capped.

'Here to stay' 

Nonetheless, the "worrisome" rise in food prices could prove long lived, Mr Brabeck said, highlighting the role of the world recession in curbing prices after the 2007-08 spike.

"I am afraid that this time the rise could be lasting," he told the Frankfurter Allgemeine Zeitung newspaper.

In such an environment, it was "madness" to encourage the growth of farm crops used in making biofuels, he said, advocating "no food for fuel" as a means of keeping crop prices in check.

Genetically modified crops also represented part of the answer to producing more food.

"With current techniques, including gene technology, one could feed up to 9.5bn people."


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Senior Contributor

Re: An intersting article on food policy. Oh yea they slam bio fuels.

The man from Nestle has it partly right.  Price controls don't work and high prices may be longterm.  The other part is mostly a political statement, though he embeds the argument in "no food for fuel" logic.  He never complained when farm prices were in the sink and farmers were in need of creating demand for their products.

 

Then, he reverses his argument, or the article does, by indicating current technology can feed up to 9.5 billion people.  So, what's his real objective with this statement?  Are high prices---and shrinking margins--- a threat to Nestle's profits and business strategy? 

 

I don't think he's as much of a humanitarian as it appears.

 

 

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Senior Advisor

Re: An intersting article on food policy. Oh yea they slam bio fuels.

He's just what the corperate world is operating on --bottom line fear of the investor in any given quarter ---

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Senior Contributor

Re: An intersting article on food policy. Oh yea they slam bio fuels.

<tongue in cheek> If only we could trade wheat for oil, gas prices would be lower for the Midwest.

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