The price of bread is a topic that’s been hitting the news headlines for some time now and it’s a subject that is likely to continue to gain column inches.
Wheat is the main issue, with low stocks and weather problems leading to rising prices which are impacting bakers. Rising energy costs for electricity, gas and road fuel are also contributing to the necessity for bakers to recover some of the growing production costs they face.
World wheat production has lagged behind consumption for five out of the last six years. Poor wheat harvests in the US, the EU, Australia and Canada have increased the cost of wheat and the recent flooding in the UK may also have an impact.
At the end of the year world cereal stocks are forecast to fall to just nine weeks, which means it would not take much increase in demand or shortage of production to use up that buffer. With world corn stocks also falling the situation is being exacerbated.
Biofuels add an interesting dimension to the issue. To reach the government’s target of at least 5% of the UK’s vehicle fuel coming from biofuels by 2010, there will be a significant impact on demand for grain.
Meanwhile demand for farm commodities such as wheat is increasing from countries such as India and China.
The combined result of the current situation is that bakers are facing greatly increased production costs, which will have to be recovered somehow.