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Food makers go through the mill as wheat hits new highs
Bill Condie, Evening Standard17.12.07
There was more bad news for food companies today as the price of wheat hit new records.
Wheat today rose to just above $10 a bushel for the first time, on more bad news about production. It went up 6.3% in Chicago last week, its fourth straight weekly gain.
Decreasing supplies because of plummeting output in drought-stricken Australia and lower yields in the US and Argentina have caused headaches for food manufacturers around the world.
In the UK, Premier Foods, maker of Hovis, and Associated British Foods, which makes Kingsmill and Ryvita, have been forced to put up bread prices this year. Companies including Kellogg's, General Mills and Sara Lee have also been forced to raise prices to consumers.
Gloomy data from Argentina, where dry, hot weather has forced down wheat yields were the latest blow to the market, which saw wheat futures for March delivery rise by the Chicago Board of Trade's 30-cent daily limit to $10.095 a bushel.
The wheat price, which has more than doubled in a year, also has a knock-on effect for other food prices as it drives up the price of livestock feed. Analysts say there could be worse to come.
"Global supply is really tight at this time," Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia, told Bloomberg. "Saying there's a near-term top in the price is a very dangerous thing to do."
It is not just wheat and associated foods that have rocketed. Sharp rises in the price of basmati rice have also suffered in the UK as demand has rocketed. The wholesale cost of basmati has doubled in the past year. Tilda, the biggest importer in to the UK, reckons prices will have to go up by a third to cover rising costs.
