Bread. Brits can't get enough of it. They're not quite so into price rises, though. Mintec's Liliana Gonzalez looks at the forecast for this year's harvest


Perhaps the oldest prepared food, bread is purchased by 99% of households in the UK, with the average household buying more than 86 loaves per year.

But over the past two years, the cost of the humble loaf has increased considerably as the price of wheat skyrocketed.

So, on the eve of this season's harvest, the question on the lips of consumers and bakers alike is: "are bread prices likely to rise again?"

The price of wheat doubled between June 2007 and March 2008. Several factors contributed to this: a bad harvest, unfavourable weather, reduced stocks from the previous year and increased consumption.

Many manufacturers felt they had no choice but to pass the increases on to the consumer - and so the typical loaf of bread crossed the £1 barrier for the first time.

A good wheat harvest last summer led to a fall in wheat prices, but this was not reflected greatly in retail prices. One reason is that despite a bumper yield, quality issues impacted the harvest, particularly in the UK.

Other factors including high energy and transport costs also offset the decrease in the raw material price, and total costs remained high for manufacturers as a result.

Nevertheless, the harvest itself has a major bearing on prices and the signs, for shoppers, are promising. Planting during winter and spring was good this year and plentiful rain has helped to keep the soil moist.

As ever, there is a fine balance with the weather: too much rain could impede harvesting, whereas hot and dry weather could reduce grain yield.

At the time of writing, dry weather conditions were affecting parts of the UK and Spain but the effect on the crop has yet to be determined.

If expectations are met, the overall yield is estimated to be 22% higher than 2007/08, although still below the record levels experienced in 2008/09.

Higher domestic availability should cause a drop in wheat prices (the commodity has further fallen by 19% compared with a year ago).

If prices do fall as expected, this could be a short-lived reprieve, however, particularly if they fall too far as farmers may start to migrate to more profitable crops, such as oilseeds, which would reduce 2010 wheat plantings and lead to future shortages.

Furthermore, there are other factors that the manufacturer considers in setting the bread prices aside from the cost of wheat. Energy, diesel and fuel prices are also a relevant part of the production cost, and these have been on the rise in the past month.

Overall, assuming crop expectations are met, a good wheat harvest for this season should put downward pressure on bread prices. However, the question remains whether manufacturers and indeed retailers will pass on this price reduction and bring down the shelf price.