Switching prime land to biofuels is 'indefensible', claims Nestlé

Switching prime agricultural land over to biofuel production is "economically and ecologically indefensible", Nestlé has claimed.

Nestlé communications director François-Xavier Perroud said: "It takes 4,560 litres of water to make one litre of ethanol ... it's a nonsense."

He was speaking as a succession of analysts warned that the growth of biofuels coupled with a surge in demand for raw materials from China and India were causing long-term adverse shifts in commodities prices.

Unilever also warned of "a significant headwind from rising agricultural commodity costs"

Deutsche Bank analyst John Parker, who has just downgraded his ratings on Unilever, Nestlé and Danone due to concerns about rising raw materials costs, said: "We see it as questionable whether increases in acreage and yields can match the new demand."

A long-term adverse shift in commodity costs would have a "negative impact on profit margins" in the food industry, he claimed. "There is growing concern that the upswing in soft commodity prices is structural rather than cyclical."

An analysis of annual cost price inflation for leading manufacturers revealed a steadily increasing trend over the past five years, he said.

Gordon Kirkwood, UK commercial director at Belgian margarine producer Vandemoortele, said the impact of biofuels on feedstock price rises had "not been fully felt yet, but when it is, the price of processed food products will escalate"