Price of loaf set to rise further as poor harvests force up wheat cost by 50%

Bread prices are set to soar further on the back of a massive hike in the cost of raw materials.

Wheat prices are currently riding 50% higher than they were a year ago, as a result of poor harvests worldwide caused by extreme weather.

The National Association of British and Irish Millers (Nabim), which represents flour producers, has warned of further increases of up to 10p for a standard loaf.

Shoppers are already paying much more for a loaf of bread than they were 12 months ago. The Grocer 33 pricing survey shows that the cost of a standard 800g Hovis white loaf is currently retailing at 99p in the major supermarkets compared with 88p in July 2006.

Arable farmers here have warned that good weather will not be enough to rescue the domestic situation. Crops have been particularly badly affected in the north of England after weeks of rain, they said.

"No amount of sunny dry weather is going to pick up wheat crops that have been knocked to the ground by rain and wind," said Guy Gagen, NFU chief arable adviser.

Millers and bakers will not be able to turn to imports because wet weather in North America and scorching heat in mainland Europe and Down Under have decimated wheat harvests there, too. Alex Waugh at Nabim said: "Wheat markets are currently pausing for breath. To prevent further increases we need good news about harvests around the world. If there are further volume or quality problems - especially in the EU - wheat markets may move up further."

Premier Foods, which owns Hovis, was the first major bread supplier to flag up concern. "We anticipate we will need to recover the increased wheat costs through pricing in the comming weeks," it said in a trading statement.

Kingsmill producer Allied Bakeries also admitted the crisis was giving it a headache. "World commodity markets are rising, and wheat price is at the forefront," said sales director Martin Brewis.

"This is having an adverse impact on our cost base, and we are currently reviewing how we might manage this significant impact."

Bob Beard, purchasing director at Warburtons, the UK's top bread brand, said: "If we don't have two weeks of decent weather, the crop will be of scant quality and premiums will rise."