Predictions of a warm, dry June mean UK wheat crops will continue to be put under pressure despite Russia lifting its ban on wheat exports.
The Met Office predicted that rainfall looked likely to remain below average across many parts of the UK throughout the second half of the month, especially in the south. Some farmers are forecasting that crops in the east of the country could suffer a 25-40% loss in yield, due to drought in the region.
Said ADM Milling in a statement: "In the last week, concerns about the continuing dry weather across parts of Europe and the UK caused trade organisations to estimate further reductions in crop yields. There are varied reports on the extent of yield loss in the UK, with current estimates reflecting a 10-15% decrease."
World wheat prices fell by about 5% after the Russian government announced the end of its year-long ban on wheat exports on 1 July. Jack Watts, senior analyst at the Home Grown Cereals Authority, said it was one of the most uncertain lead-up times to harvest the world had ever seen.
"In the UK, the hot weather is bringing more stress to the crop," he explained. "The lifting of the Russian ban brings some relief but Russian exports won’t be at the 2008/9 level of 20m tonnes I expect something like 6-10m tonnes. We have to expect strong prices for the rest of 2011."
Greggs chief executive Ken McMeikan told British Baker that the firm had bought forward considerably, which put it in a good position. However, he added that it still had a quantity of wheat to buy for the last quarter of the year.
McMeikan added that the fact that it bought in larger quantities than most bakers did not guarantee cheaper deals: "There should hopefully be some benefit because of the experience of our teams and the amounts involved, but buying is also about when you buy, skill and good fortune."
He said that even if wheat prices continued to rise, putting up shop prices would be the last resort for the company: "We want to maintain our value reputation, but there might only be so much that we can absorb we will have to wait and see."