Costs heat up under high wheat prices
grain prices hitting a ten-year high last week.
New reports from the International Grains Council (IGC) and the Chicago Board of Trade (CBOT) said demand was still higher than production, putting further pressure on prices. Companies such as Premier Foods and CSM have already claimed over the past few weeks that the high price of raw materials has affected profit margins. "We are disappointed at not having been able to create more momentum for reasonable price increases, which would have been justified in view of the strong rise in the prices of raw materials," chief executive officer Gerard Hoetmer of CSM said last month. The Chicago Board of Trade (CBOT) said last week that wheat production in Canada, the world's second largest wheat exporter, will be down 19.6 per cent on last year, encouraging the rising wheat bushel prices last week. The continuing dry weather in Eastern Europe, Russia and Ukraine was also to blame. "Basis levels for soft winter wheat were steady to higher, as global supplies are tight and export demand continues to be strong," the CBOT said. The International Grains Council (IGC) said in its grain market report last week that wheat prices had gained between $20 and $35 per tonne, hitting their highest for ten years. "In addition to the impact of adverse summer weather on northern hemisphere wheat crops, especially on yields and quality in Europe, markets were underpinned by strong demand from importers seeking to secure their needs as international prices rose further," the IGC said last week. The report predicted total EU wheat production will be 3.9m tonnes lower than in 2006, however demand will still be higher, encouraging these higher prices. The price of bread in France is rising as the cost of wheat price hits a ten-year high in August, according to the FT this week. The report claims the French boulangeries will raise the price of a baguette by 5 cents over the next few weeks in order to cover the cost of raw materials. "Two cents will be used to offset the cost of flour and three cents will be used to offset an increase in minimum wage," Jacques Mabille, head of the Confederation Nationale de la Boulangerie-Patisserie Francaise, told the FT. While high bread prices, alongside unemployment and malnutrition, caused the French Revolution in 1789, the current high wheat prices are not expected to encourage such results. However, with the continuing high prices of raw materials, the food industry are increasingly suffering under the constraints.