POVERTY: Wheat prices push food costs to 13-month high

Angela Monaghan
08 Sep 2010
Food inflation rose to the highest level in more than a year in August as the effects of sharp price rises in some global commodities including wheat and sugar
Wheat prices have risen by 60% over the past 12 months
The latest British Retail Consortium/Nielsen shop price index showed a rise in annual food inflation to 3.8pc last month, from 2.5pc in July, which was the highest level since July 2009.
Wheat prices have risen by 60pc over the past 12 months, which has a direct impact on foods that contain it, but also on the cost of animal feed.
The report said that there are also growing concerns about international meat prices – at a 20-year high - given the rapid inflation in the cost of livestock feed. Lower meat stocks in major producing countries such as Argentina, Australia and the US, would also add to price pressures, it said.
However, Stephen Robertson, director general of the BRC, said current food inflation levels should not be overstated.
"We're nowhere near the return of the double-digit food inflation of two years ago. Despite its recent increase, wheat is over a third cheaper than its peak in 2008, while oil prices are virtually half of what they were back then.
"In response, retailers are offering more deals. Milk and bread are particularly competitive battlegrounds. A third of groceries are now on promotion and customers are shopping around."
Overall shop price inflation grew more modestly in August to 1.7pc from 1.5pc as non-food inflation slowed to 0.5pc from 1pc. Non-food retailers resorted to promotions to drive sales.
The report said shop price inflation should remain low in the coming months as retailers continue to discount prices amid a weak consumer spending environment.
The Bank of England's Monetary Policy Committee will weigh up the twin threats of high inflation and weak growth as it begins its two-day policy meeting today.
The MPC is expected to leave interest rates on hold at 0.5pc when it announces its decision at noon on Thursday, despite an inflation rate which is currently running at 3.1pc and expected to remain above the 2pc target until the end of next year.

http://www.telegraph.co.uk/finance/economics/7987784/Wheat-prices-push-food-costs-to-13-month-high.html