UK wheat prices have soared since June - piling pressure on food and feed manufacturers and adding to fears that Brexit will mean the end of cheap food for British shoppers.
Prices are up across all grades of British wheat, with UK feed wheat futures - the benchmark of British prices for the commodity - rising 14% to £131.50/tonne since the Brexit vote (23 June to 11 October 2016).
And the price hikes come despite global wheat commodities trading at a six-year low, amid expectations of a strong worldwide crop, with Chicago wheat futures down 16% to $149.62/t (£122.69/t) in the same period.
“Within moments of the Brexit vote we saw a jump in the price of wheat because of sterling’s fall,” said Richard Page, MD at Inspired Pet Nutrition. “And we aren’t even talking about imports, this is a British product we are buying from down the road.”
Though European wheat supply has been disrupted by poor yields in France - a major exporter - Paris wheat futures have still fallen 4% to €158/t (£143/t) since June, suggesting the depreciation of sterling is “one of the main factors” behind the steep rise in UK prices, said Helen Plant, senior analyst at AHDB Cereals & Oilseeds.
“British farmers can afford to put their prices up and still remain competitive,” she added.
The weakening of the pound - down 18% against the dollar to a 31-year low and 15.5% against the euro - has also contributed to a surge in British wheat exports, putting further upward pressure on prices. In the first two months of the season (July and August) the UK shipped 475,00 tonnes of wheat - the highest level in six years [AHDB].
If wheat prices continue to rise unabated, shoppers will face higher prices for wheat-based foods like bread and biscuits, as well as other products like petfood.
“Normally there is a degree of hedging taking place to protect against prices rising and falling, but those kind of protective mechanisms don’t last forever,” said Alexander Waugh, director general of the National Association of British and Irish Flour Millers. Most businesses wouldn’t be able to absorb the costs and would be forced to pass them down the supply chain, he added.
“Food price inflation is coming around the corner,” added Page. “Even manufacturers buying in the UK have suffered significant price rises because we are dealing in global commodities. Unless we can find even more efficiencies within processes, I don’t see anybody escaping food price inflation.”
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