The continued rise in the price of wheat means that a sharp hike in overall food inflation is becoming inevitable, according to analysis from Verdict research.
The most immediate impact will be felt in the price of bread and bakery products but other food items that make use of grain will also be affected over the longer term. This includes some meat products where grain is used as animal feed.
Verdict’s analysis shows that should the wheat price remain elevated for the next few months shelf prices for many products could go up by 6.7% within a year. Some items, such as croissants, could go up by as much as 11.1%.
“Exactly what happens to food inflation depends largely on how long wheat prices remain high, but yesterday’s move by Russia makes it all the more likely that they will be elevated until at least the end of the year. Clearly that’s going to be very unhelpful for the inflationary outlook,” says Neil Saunders, consulting director of Verdict.
Any increase in food prices will not come immediately as the increased cost of wheat will take some time to work its way through the supply chain, however, it could begin to hit as early as the next couple of months on some staples.
“The timing of this could not be worse, consumers will really start to feel the impact of this early next year – right at the time VAT will be going up and unemployment will be on the up from public sector cuts” said Saunders.
Source: Verdict
