Too early to tell impact of high wheat prices on flour products

By Mike Stones

- Last updated on GMT

Related tags Wheat prices Russia Us

It’s too early to predict the impact of huge rises in wheat prices on European flour products such as bread and biscuits, according to the National Association of British & Irish Millers.

Disputing UK press reports of a 5 per cent hike in bread prices, a NABIM spokesman told “The European wheat harvest is likely to be between 5 -10 per cent below forecast but, at present, there are too many variables, to predict the impact on bread and biscuit prices​.”

Much will depend on the actual harvest and when buyers source their flour stocks. Also the favourable ratio between grain stocks to consumption should help to mitigate upward pressure on prices, he said. “The current stocks-to-uses ratio is 28 per cent which is quite a big increase in supply (​than formerly).”

But, the longer the speculation persisted, the bigger the likely impact on prices, he acknowledged.

Drought and wildfires

NABIM’s comments follow news that wheat prices have increased 50 per cent since late June to reach a 22-month high after drought and wildfires devastated Russian crops.

Earlier this week, Chicago Board of Trade (CBOT) wheat prices for September delivery exceeded $7-a-bushel level in United States trade for the first time since September 2008, before falling back to $6.93.

The price rises have fuelled speculation about higher prices for flour-related products such as bread and biscuits.

Gary Sharkey, head of wheat procurement at Premier Foods, manufacturer of Hovis bread, told the Financial Times ​that the industry would be "unable to ignore a 50 per cent rise in wheat prices​".

Higher wheat prices could also affect meat and poultry prices since many European cattle are fed wheat and wheat derivative products.

But another leading food manufacturer told the BBC higher wheat prices on commodity exchanges would not necessarily lead to higher prices in supermarkets.

"Although there is inflationary pressure on commodities like wheat in the futures markets, food producers will want to wait to see how harvests have performed around the world before making any decision on prices​," said the spokesperson for the unnamed company.

Wheat exporter

Russia was the world's fourth largest wheat exporter in the 12 months to June after the US, the EU and Canada, according to the US Department of Agriculture.

Heat waves and drought have led to wildfires in several regions in Russia.

Earlier today Russia decided to ban grain exports until 1 December

The BBC quoted Russian Prime Minister Vladimir Putin as saying: "I think it is advisable to introduce a temporary ban on the export from Russia of grain and other agriculture products made from grain​."

Earlier in the week the country’s deputy agriculture minister Aleksandr Belyayev said there were no plans to restrict its grain exports at present. "[Restrictions] will not be imposed yet. The…situation today does not demand this. It is very easy to reduce exports, but it is very hard to increase it,"​ he said.

Russia has high levels of grain in reserves and will start using those, he added.

Belyayev estimated this year’s harvest at between 70-75m tonnes compared with 97m tonnes in 2009.

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