By Javier Blas and
Jenny Wiggins
GLOBAL FOOD COMPANIES are coming up with their own solutions to avoid a repetition of last year’s food shortages and record-high prices, in many cases moving ahead of government initiatives.
“Last year’s food crisis was a wake-up call,” says Bill Lesher, of Global Harvest Initiative in Washington, a group involving some of the world’s biggest farming companies, such as Archer Daniel Midlands, DuPont, John Deere and Monsanto. “Our members want to avoid a repetition.”
Food companies were caught off guard in early 2008 when prices of staples such as wheat, milk and cocoa started to rise unexpectedly after almost 20 years of stability. Although the crisis has abated, prices remain high and beyond companies’ comfort range, say executives.
As a result companies including Nestlé, PepsiCo and Unilever are rethinking their strategies. The world’s largest traders of food commodities - Archer Daniel Midlands, Bunge, Cargill and Louis Dreyfus - have also introduced initiatives.
Some companies have begun to spend tens of millions of dollars a year investing in sustainable farming in developing countries to guarantee long-term supplies at low prices. They are building more processing plants and storage facilities to meet booming demand from Asia. More and more companies are also for the first time investing directly in farmland and irrigation projects. In a radical move, some agricultural trading houses have introduced a surcharge on commodities such as coffee and cocoa.
They are then using the surcharge revenues to invest in farming operations to help secure long-term supplies.
Other food companies and trading houses are taking much smaller steps, launching internal reviews of the long-term sustainability of their supply chains or holding public discussions on the future of food.
Food executives agree, nonetheless, that business as usual is not an option.
Geoff Lane, a partner in sustainability at PwC, the consultancy, says in the past big companies have been pretty fickle in terms of supply relationships as food was “a buyer’s market”. But yesterday, he added, “all the indicators are pointing in one direction: food scarcity”.
The United Nations Food and Agriculture Organisation will bring some of the world’s biggest food companies to Milan from today for a private sector forum ahead of next Monday’s World Summit on Food Security.
The gathering is the largest ever organised for the private sector by the FAO, signalling a new consensus among food officials on the need to get ideas from the private sector. For all the companies’ initiatives, they are in most cases still fighting in Europe and the US to preserve agricultural subsidies, in spite of the fact many analysts blame these subsidies for exacerbating the food crisis.
The FAO estimates that the world will need until 2050 to boost agricultural investment by $83bn (€56bn, £51bn) a year — a 50 percent increase on the past decade’s average — to feed a growing population. Most of the money will come from the private sector, from small farmers to big agribusinesses.
Nestlé is emblematic of the food companies’ new actions. The Swiss-based company is investing more than $100m over the next decade to provide farmers in Ivory Coast and Ghana, which together account for 60 percent of the world’s cocoa output, with millions of disease-resistant plants to boost supply.
