UK food retailers and manufacturers are set to bear the brunt of a rise in global wheat prices following poor yields in Russia and Pakistan.
Following the worst Russian droughts for 50 years and the recent floods in Pakistan, the US government has slashed world wheat crop estimates.The US Agriculture Department (USDA) reduced its forecast for the world wheat harvest by 2.3% on Thursday to 645.73 million tonnes in its August report, below the 650.02 million tonnes traders expected.
In response to its worst drought in a century, Russia, the world’s biggest wheat exporter, has imposed a grain export ban which is due to come into force from August 15. President Dmitry Medvedev said the ban could be lifted before its planned December 31 expiry, depending on the harvest, although Prime Minister Vladimir Putin has said it could last into 2011.
Concerns about the harvest in Canada and Australia have also increased grain prices, with wheat hitting a two-year high last week having risen more than 40% in a month.
Greggs, the UK’s largest bakery chain, has warned that the rising wheat prices are set to make trading tough but says the rises should be manageable. Following the announcement of a rise in first half profits, Greggs said the cost of ingredients looks set to increase.
Chief executive Ken McMeikan admitted: “We now expect an increase in ingredient cost inflation in the second half of the year and there could be a small
price increase in the products in our stores.” He added: “People tend to have short memories. We’ve been here before when wheat prices rose even more. in 2007-08 wheat was £200 a tonne.”
