Blog: Dean BestBiofuels debate set to heat up again

Dean Best | 27 May 2008

"The situation is very tight." In measured tones, Paul Bulcke, Nestle's new CEO, spoke for the whole food industry when he handed down his view on rising commodity costs over the weekend.

So far, Nestle has been able to ride out the food inflation storm. The company's price increases, designed to offset rising costs, have stuck and the world's largest food maker has upped its sales forecast for 2008.

Nevertheless, Bulcke, who took charge at Nestle in April, is, like the rest of you, closely watching commodity prices. Speaking to a Belgian newspaper, he was precise in his assessment of rising costs. "I do not expect prices to double in the coming months. They will not fall but they will certainly stabilise," Bulcke said.

Much of the industry is hoping for some sort of relief. Last week, the debate over food inflation again grabbed the headlines with a series of claims and counter-claims. In the US, the Department of Agriculture said that food prices in the country will rise by 5% this year - the highest for 18 years. In Europe, the EU unveiled plans to increase food production in a bid to stem rising prices. Those plans prompted the EU's farm chief to forecast a drop in food prices as supply catches up with demand.

Of course, it is Brussels' - and Washington's - support for corn-based biofuels that has been a key factor in driving up the price of grain. Both the EU and the US have so far stood their ground on biofuels, despite caution from governments in Europe and outright opposition from sections of the US food industry.

And this week, biofuels will reappear on the international agenda, with the UN seeking new global guidelines on their production. The UN's Food and Agriculture Organisation wants international agreement on a series of issues in order to combat rising food prices, which is threatening to lead to starvation in countries from Cameroon to Haiti.

For some, pointing the finger at biofuels is misguided. For them, growing populations and changing diets in China and India are the central, underlying cause for food inflation. Add to that the belief that investing in alternative fuel is necessary to combat climate change and the complexity of the issue becomes clear.

Plenty for government and industry to chew over in the weeks ahead.


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