Cantillon

Tue, Jul 31, 2012, 01:00

Inside the world of business

Rising prices provide food  for thought for us all  

Yesterday’s warning from the World Bank about rising food prices was not unexpected.

The last few months have seen a dramatic spike in key food product prices, with some predicting a rerun of 2008, when a jump in food prices sparked riots and called into question the policy of using crops for biofuels.

This current problem is rooted in the US, where a drought in the midwest has spread across the country, the world’s biggest producer of corn, prompting a dramatic increase in the price of the commodity.

The situation has been compounded by dry conditions in Russia, Ukraine and Kazakhstan.

Wheat prices have jumped more than 50 per cent, and corn, a key ingredient in food products and animal feed, has risen by more than 45 per cent since mid-June.

Soybean has also risen by 30 per cent over the past few months. Yesterday the World Bank said, it “cannot allow short-term food-price spikes to have damaging long-term consequences for the world’s most poor and vulnerable”, stating its intention to “help governments put policies in place to help people better cope”.

The price spike is the first major issue to confront president of the Washington-based World Bank, Jim Yong Kim. While the bank pinpointed short-term measures to combat food price volatility, the solution of how to deal with food security without compromising the interests of the market is complex. It also highlights the ethical considerations that underpin the business of food. While record high commodity prices spell good news for some, the downside can be that consumers, particularly in poorer countries, are priced out of the market, which itself can have an impact on demand. The reality of food security is worth keeping in mind the next time someone celebrates Ireland’s thriving food industry, the success of which is down, in the most part, to record prices on world markets.

Quinn supporters should recall 2005 employment duties failure

The thousands of local supporters and former Quinn Group employees who gathered to rally around Seán Quinn in Ballyconnell on Sunday would do well to remember an incident from 2005.

That year, Fermanagh-based Quinn Cement was censured by the Labour Court, which found that the company had failed to honour employment commitments made earlier that year relating to sick pay, disciplinary procedures and the length of the working week.

Siptu had taken the case on behalf of its members at Quinn Cement – most of whom were “confidential” union members.

The court compelled Quinn Cement to implement a 39-hour week and to introduce a sick-pay scheme – hardly a radical request at a time when the group, and the country generally, was on the ascent.

Seán Quinn is not what you’d call union-friendly.

While some businesses within his colossal empire did recognise and engage with unions, such as his hotel businesses and some international divisions, on the whole the Quinn Group refused to recognise trade unions.

Despite his reincarnation as some kind of Santa Claus figure by his supporters in recent months, it is worth asking how much of his enormous fortune Quinn actually shared with his employees.

Of course, many would argue that this is not the job of a (once) successful businessman – rather it is to build businesses and look after the bottom line.

Perhaps this may explain the somewhat curious cry of solidarity from comrade Michael O’Leary, who sent a letter of support to the Quinn rally on Sunday. As another executive who has become virtually indistinguishable with the business he leads, the Ryanair chief executive is notoriously anti-union. Indeed Ryanair’s landmark case against Impact – which had huge implications for how companies that do not recognise trade unions handle industrial disputes – dates from around the time of the Quinn Cement Labour Court case. O’Leary, like the Seán Quinn of yore, is an extremely successful – and rich – businessman. That’s where the similarities end. While Michael O’Leary continues to lead an extremely successful company, Seán Quinn presided over one of the biggest corporate fiasco’s in Irish history.

Unfortunately that fiasco will be one for which the Irish State will be picking up the tab for many years to come.

Airline deal no alliance of equals

The code-sharing agreement between Aer Lingus and Etihad is a useful fillip for Christophe Mueller as he fends off yet another unwanted approach from Michael O’Leary.

It will no doubt bring some extra passengers Aer Lingus’s way but it’s important not to lose sight of the fact that this is no alliance of equals.

Etihad is the 800lb gorilla in this particular coupling and the arrangement is best seen in that light.

And what is important here is that Abu Dhabi-based Etihad is in a three-way fight with Dubai-based Emirates and Doha-based Qatar Airways.

All three petro dollar-backed entities are pursing the same business plan, more or less. They are investing heavily in aircraft they hope to fill through traffic being fed into their gulf-based network by other carriers.

The Aer Lingus code-sharing accord will be Etihad’s 36th such agreement, according to Bloomberg, giving it the edge over its Persian Gulf rivals when it comes to tie-ups abroad.

And Etihad shows no sign of slowing down, with talks under way with Paris-based Air France-KLM Group on forming a commercial alliance, according to the Franco-Dutch company’s boss, Jean-Cyril Spinetta.

Which – if any – of the Gulf carriers will emerge victorious is difficult to garner and much depends on the depth of their owners’ pockets.

But Aer Lingus has placed its bet.

Quote of the day

The ECB has been hinting, hinting, hinting, but now its the time to deliver

– Henk Potts, market strategist at Barclays Wealth, on speculation that the European Central Bank plans to intervene to stabilise the sovereign debt crisis

Today

Convenience foods group Greencore publishes its interim management statement

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