UK facing threat of big rise in food inflation

Published on Friday 30 July 2010 18:54

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 per cent higher by early next year as cost hikes in animal feed - the first link in the food chain - sent shockwaves through the industry.

BOCM Pauls, the UK's biggest animal feed supplier, reported a 20 per cent increase in the price of raw material feed on last year, following a 30 per cent spike in feed wheat costs.

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 per cent.

Tom Vosa, chief economist for the Clydesdale and Yorkshire Banks, said: "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 consumers could expect a lag time of around six months before they saw a jump in retail prices.

British Poultry Council chief executive Peter Bradnock said the poultry industry was "not in a position to absorb these increases".

Food company Findus said the high prices "could lead to inflation in food prices as we've seen previously in the market peaks of 2007 and 2008".

Chris Etherington, chief executive of wholesaler P&H, told the Grocer magazine there was a danger of repercussions in the wider economy.

He said: "I think this could be the beginning of the double-dip recession. This is really scary stuff."