Food prices set to increase by 10%
The British food industry is preparing for a massive jump in food inflation in the wake of soaring animal feed prices, a shortage of silage and poor harvests, according to a new report.
Experts predict food prices could be at least 10% higher by early next year as cost hikes in animal feed - the first link in the food chain - sent shockwaves through the industry, The Grocer reported.
BOCM Pauls, the UK's biggest animal feed supplier, reported a 20% increase in the price of raw material feed on last year, following a 30% spike in feed wheat costs, the trade magazine said.
The company warned selling prices to dairy, poultry, beef and pig farmers would have to increase by the same amount over the next three months.
The National Farmers' Union said the dry weather had added to problems for farmers by decimating yields of silage for winter feed by up to 50%.
Food producers are already reeling from the soaring cost of commodities such as palm oil, cocoa and soya oil, which have leapt 39%, 23% and 14% respectively since last year, according to Mintec figures.
Commodity experts from Russia have also announced that the country's wheat exports could plummet by almost 50% because of a drought, raising fears of a Russian export ban which would have a significant impact on UK food inflation.
Tom Vosa, chief economist for the Clydesdale and Yorkshire Banks, told The Grocer: "We expect to see an acceleration of food prices and a return to double-digit increases by early next year if the situation doesn't change."
Will Hayllar, a partner at financial analysts OC&C, said British consumers could expect a lag time of around six months before they saw a hike in retail prices.
British Poultry Council chief executive Peter Bradnock said the poultry industry was "not in a position to absorb these increases".