Food to Rise on Lack of Credit, Nestle’s Brabeck Says

Food prices may rise because a lack of credit for farmers curbed their ability to buy seeds and fertilizers and may limit production, Nestle SA Chairman Peter Brabeck-Letmathe said.

Cocoa, used to make chocolate, reached its highest since at least 1989 in London on Jan. 29. Robusta coffee has advanced 8 percent this year, while the arabica variety is about 5 percent higher. Wheat, corn, rice and soybeans on the Chicago Board of Trade have all declined.

“Many farmers over the world didn’t have access in October, November, December for credits,” the chairman of the world’s biggest food company said in an interview at the World Economic Forum in Davos, Switzerland, on Jan. 31. “They were limited in acquiring seed and acquiring fertilizer.”

Prices of wheat, rice and corn rose to records last year, sparking riots from Haiti to Ivory Coast. World food production may drop in the next crop year as falling prices and the recession prompt farmers to lower investment and cut plantings, the United Nations said this month.

The UN’s food-price index fell for a sixth consecutive month in December to 148 points, from a peak of 219 in June.

Demand for cereals to use as animal feed is rising about 5.4 percent a year, while demand for cereals for people is increasing 1.3 percent to 1.5 percent, according to Brabeck.

“It is probable that in 2009 we have a decline in production and we will have an increase in demand,” the chairman said. “This will have another push on raw materials.”

Nestle, based in Vevey, Switzerland, makes products from Haagen-Dazs ice cream to KitKat chocolate bars.

Corn Prices

Corn for March delivery is trading at $3.72 a bushel in Chicago, while grain for supply a year later is at $4.35. The wheat contract closest to delivery is at $5.64 a bushel, rising to $6.50 a bushel for the March 2010 contract.

The London-based International Grains Council on Jan. 29 raised its forecasts for wheat and corn production this year. Fortis a day later raised its estimate for how much cocoa supply fell short of demand in the 2007-08 season, increased its forecast for the surplus in supplies of robusta and narrowed its outlook for the oversupply in arabica.

Bloomberg