A significant price rise on flour is being tipped as "inevitable" as rising wheat prices on the world market hit the baking industry.
The rise could be £40 per tonne on breadmaking wheat, industry sources suggest, which could lead to bread price increases of up to 10p per 800g loaf.
National Association of British and Irish Millers’ director general Alex Waugh explained that the forward price for wheat in November 2008 was currently £142 per tonne delivered to the north west (Manchester/Liverpool).
When the milling industry last put through a price increase of £29 per tonne in early September 2006, November wheat was trading at £108 per tonne - so cost prices are up £34/tonne since then. Waugh said: "It is inevitable that there will be a price rise on wheat."
Miller Rank Hovis’ sales and marketing director Jon Tanner said a price increase before the harvest couldn’t be ruled out. "Prices have risen relentlessly since last September and it is unlikely that millers will be able to absorb these costs for much longer. If the wheat market maintains its strength, then a flour cost price rise is inevitable."
ADM Milling said it was monitoring the situation on a daily basis, but it was too early to comment on possible price rises.
Meanwhile, French millers this week announced they would be putting up prices by 54 euros (around £38) a tonne as of 1 July.
Waugh said world wheat and other grain prices were under pressure for a variety of reasons, particularly rapid increase in demand for biofuels and low world stocks. "There is no real indication on the UK harvest yet; we are expecting quite reasonable quantities. The problem is that wheat prices are up around the world and markets are very volatile," he said. "There have also been scares - crops from Eastern Europe have been 10 million tonnes less than expected and the US has been hit by bad weather for the second year in a row."
ADM Milling wheat and flour manager Lewis Wright added that the weather was "conspiring against us in all areas", with world stocks at a 30-year low. Heavy rains in the past week had damaged crops in parts of the UK.
Meanwhile, plant bakers are also awaiting developments, according to Federation of Bakers director Gordon Polson.
Warburtons’ purchasing director Bob Beard said Warburtons was watching the markets "with alarm". Speaking on Radio 4’s Today programme this week, Beard said figures over the past few days suggested "potential for a cost price increase of between 6p and 10p per loaf". The trade was also being hit by price increases on wheat, milk and molasses, which are used to make yeast, he added.
John Tjaardstra, assistant executive director of the International Grains Council, said interest in ethanol was a major factor in market volatility, and consumption was slightly ahead of production for the third year running.