Supermarkets may be waging a price war on bread, but experts have warned the low prices will be short-lived thanks to rocketing grain costs and a predicted shortage of domestic wheat following a 50% hike in exports.
The average number of promotions on wrapped bread has shot up 60% in the past month on the same period last year, according to Assosia. This has helped drive bakery prices down 4% in the past six months, according to The Grocer Price Index.
However, the cost of wheat hit a two-year high last month putting renewed upward pressure on prices. "There are lots of deals but, inevitably, we are now talking to retail customers about price increases," said one brand director.
"Milling wheat is pushing £200 a tonne at the moment, which is approaching the record levels of two-and-a-half years ago, and flour is up 30%. Retailers are aware of the input inflation."
Bread prices were likely to start increasing again, agreed analysts. Rising wheat exports would compound the problem by creating a shortfall of domestic supply, they added.
According to the Home Grown Cereals Authority, the UK exported 50% more wheat in July 2010 than July 2009 as countries were forced to look elsewhere because of the Russian ban.
"German farmers are snapping up British wheat it's normally the other way round," said Gary Sharkey, head of procurement at Rank Hovis, adding he was "hugely concerned" the rise in exports would lead to domestic wheat shortages next year.
The UK would have sold up to 800,000 tonnes of the season's 1.25 million tonne total output by mid-October, predicted one commodity expert. "There could be a tight wheat supply later in the season from the new year onwards," he said. This would result in increased imports of feed and milling wheat and food inflation, he warned.
"In all my 25 years in the industry, I have never been as concerned about security of supplies," added Sharkey.
The average number of promotions on wrapped bread has shot up 60% in the past month on the same period last year, according to Assosia. This has helped drive bakery prices down 4% in the past six months, according to The Grocer Price Index.
However, the cost of wheat hit a two-year high last month putting renewed upward pressure on prices. "There are lots of deals but, inevitably, we are now talking to retail customers about price increases," said one brand director.
"Milling wheat is pushing £200 a tonne at the moment, which is approaching the record levels of two-and-a-half years ago, and flour is up 30%. Retailers are aware of the input inflation."
Bread prices were likely to start increasing again, agreed analysts. Rising wheat exports would compound the problem by creating a shortfall of domestic supply, they added.
According to the Home Grown Cereals Authority, the UK exported 50% more wheat in July 2010 than July 2009 as countries were forced to look elsewhere because of the Russian ban.
"German farmers are snapping up British wheat it's normally the other way round," said Gary Sharkey, head of procurement at Rank Hovis, adding he was "hugely concerned" the rise in exports would lead to domestic wheat shortages next year.
The UK would have sold up to 800,000 tonnes of the season's 1.25 million tonne total output by mid-October, predicted one commodity expert. "There could be a tight wheat supply later in the season from the new year onwards," he said. This would result in increased imports of feed and milling wheat and food inflation, he warned.
"In all my 25 years in the industry, I have never been as concerned about security of supplies," added Sharkey.
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