Glencore food chief says US drought is 'good for business'

The head of Glencore's food trading business has said the worst drought to hit the US since the 1930s will be "good for Glencore" because it will lead to opportunities to exploit soaring prices.

Chris Mahoney, the trader's director of agricultural products, who owns about £500m of Glencore shares, said the devastating US drought had created an opportunity for the company to make much more money.

"In terms of the outlook for the balance of the year, the environment is a good one. High prices, lots of volatility, a lot of dislocation, tightness, a lot of arbitrage opportunities [the purchase and sale of an asset in order to profit from price differences in different markets]," he said on a conference call .

Mahoney said Glencore, which reported pre-tax profits of $2.2bn (£1.4bn), would be able to exploit the drought to its advantage, especially after its takeover of Canadian grain trader Viterra. "I think we will both be able to provide the world with solutions, getting stuff to where it's needed quickly and timely, and that should be good for Glencore."

The blistering heat in the US has destroyed 45% of the corn and 35% of the soya bean crop, pushing the price of the commodities to record highs. Overall global food prices rose by 6% in July, according to the UN.

The drought is so severe that G20 nations are considering holding a crisis summit. The last severe food crisis, in 2008, sparked riots in cities from the Caribbean to the far east. The United Nations food agency warned this month that "there is potential for a situation to develop like we had back in 2007-08." Abdolreza Abbassian, senior economist and grain analyst at the UN's Food and Agriculture Organisation, told Reuters: "There is an expectation that this time around we will not pursue bad policies and intervene in the market by restrictions, and if that doesn't happen we will not see such a serious situation as 2007-08. But if those policies get repeated, anything is possible."

Raj Patel, an expert in the global food trade and former UN employee, said Glencore and other multinational food traders were in a "fine position to make money from a crisis because they've pushed for an international economic system that relies on them".

"They [Glencore] are millionaires making money from other people's misery caused by the drought," he said. "It's the sad fact of how the international food system – that they pushed for and our governments gave to them – works.

"It's unsurprising that a crisis is a revenue generator."

Oxfam has called on governments to intervene in the international food system to relieve the pressure on poor people in developing countries.

"These latest [food price] figures prove yet again that there is something fundamentally flawed in the way we produce and distribute food around the world," said Hannah Stoddart, Oxfam's head of economic justice policy. "For too long our leaders have stood by complacently, while up to a billion people go hungry worldwide."

Jeremy Grantham, chief investment strategist of asset management firm GMO, has warned: "We are five years into a severe global food crisis that is very unlikely to go away."

Glencore has previously attracted attention by selling more than £50m worth of wheat to the World Food Programme.