WHEAT FOCUS: 'A constant battle'

Related tags Rank hovis Bread Cost Millers

Surging wheat prices are leading to some hard bargaining along the
supply chain over where the extra costs can and should be taken,
according to millers and bakers.

"Millers have increased the price of flour at least twice in the UK since the gravity of the situation became apparent last summer,"​ Peter Jones, wheat director at the UK's biggest grain miller Rank Hovis​ told BakeryandSnacks.com​.

Last year's European heatwave delivered the world's third consecutive wheat harvest short-fall, exhausting global buffers stocks and prompting a surge in prices of 50 per cent or more.

"Everyone in the industry is trying their hardest to keep the impact of price rises to a minimum - farmer, miller, baker and retailer - but we are faced with an almost daily need to renegotiate. It would be wonderful to see the costs passed on throughout the industry, but I can see no sign of that happening any time soon,"​ said Jones.

"Bread prices in the UK have risen once, last August, and so some of the increase has been passed on the consumer. But most of it is still being swallowed by the food chain."

Nonetheless, the cost pressure at each production stage is now acute. "We have all been faced with the same problem. Other raw material costs have been rising steadily over the last few years and these have not generally been recovered. But with wheat prices rising so sharply, we had to say enough is enough and increase our prices to try and restore our margins,"​ said Jones.

Rank Hovis sees little prospect of a return to previous pricing levels in the short-term. "There is some wheat out there to buy for next year, and the price is certainly lower than it is at the moment,"​ but these prices assume a strong harvest this year, explained Jones. "And in any case, although prices are predicted to fall, they are still nowhere near returning to pre-crisis levels, so there are still margin issues to contend with."

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