The Irish Bread Bakers Association (IBBA) warned that poor harvests in various parts of the world had dramatically increased the cost of wheat.

World wheat stockpiles are at their lowest level in 25 years. Prices have surged to 10-year highs after a drought in Australia threatened to cut its harvest in half. Australian Crop Forecasters cut its estimates for 2006/7 to 11.5 million tonnes, from 25 million a year earlier. Harvests have also been hit in Ukraine and North America.

Paul Kelly, director of Food and Drink Industry Ireland, speaking on behalf of IBBA, said: "The major increase in the cost of raw materials comes at a time when other business costs are also rising much faster than general inflation. Bakers are experiencing increases of up to 20% in the cost of flour and increases of over 30% in the cost of gas, their main energy source."

He said that cost increases must eventually be reflected by retail prices. "This does not mean that price increases are profit increases," said Kelly. "While there is little that can be done about rising global prices, the government must reign in spiralling business costs. The cost of energy and waste management are just two areas where decisive action is needed."

Over the past two years, a number of bakeries in Ireland have closed or significantly rationalised their businesses.

"Failure to recoup cost increases in the marketplace will lead to further rationalisation and job losses," said Kelly.