The surge in the price of food will continue for at least a further two years, the chief executive of one of the world's biggest food companies has told The Times.

Indra Nooyi, the joint chairman and chief executive of PespiCo, predicted that “structural inflation for food is here to stay for another two to three years”, and that it would be propelled by government initiatives to subsidise ethanol programmes, the biofuel that is seen as a more environmentally friendly alternative to oil.

Over the past 12 months milk prices have doubled as demand for corn, the staple diet of a dairy herd, increased substantially. Corn is also used in the fermenting process to produce ethanol. The cost of a bushel of corn doubled over the same period.

Food companies have also had to cope with a rise in the cost of other raw materials such as fuel, where the price of oil broke $100 a barrel.

Last year, several food companies, including Hershey, the chocolate bar maker, warned their shareholders that the rise in raw material costs would erode earnings.

Ms Nooyi argued that consolidation in the food manufacturing sector would not address the problem of inflation. She said: “This is not about scale and taking out costs. It is about the behaviour of governments, of ethanol programmes.”

She also said that there would not be a “transformational” deal for PepsiCo, such as a merger with a rival. Wall Street had speculated that PepsiCo and Danone, the European food group, would make suitable merger partners.

Ms Nooyi said she did not see any sizeable deal on the horizon that would make financial sense for PepsiCo shareholders and explicitly ruled out any acquisition of Unilever's food business.

Ms Nooyi is not the only senior business figure to predict that high food prices were here to stay. Carl Weinberg, co-founder of High Frequency Economics, a think-tank, predicted that continuing food-price inflation, along with an expected slowdown in China, presented one of the biggest downside risks to the American economy.

Kevin Logan, senior economist at Dresdner Kleinwort, the investment bank, last week forecasted that inflation in the US would continue at between 2 and 2.5 per cent in 2008, spurred by the rising cost of food and energy. He said that Wall Street had braced itself for the inflation. Mr Logan said: “The gold market is anticipating a rise in inflation and the weakness of the dollar itself carries an inflationary threat.”

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