The US Agriculture Department reported last summer that growing conditions for the US spring wheat crop were the worst in 18 years.

Continuing dramatic increases in the international price of wheat have driven the production costs for bread significantly higher, according to the Irish Bread Bakers Association (IBBA), and there is no other option for the industry but to pass on some element of these increased costs to retailers early in 2007.

Last July Finfacts reported: The combination of heatwaves in Europe and the US, low global grain stocks and an increase in production of biofuels has seen wheat prices rise to 10-year highs and may lead to big increases in the cost of bread and pasta.

Poor harvests in Australia, the Ukraine, Argentina and North America have dramatically increased the cost of wheat. Prices have surged to ten year highs as world wheat stockpiles have fallen to their lowest levels in 25 years and a drought in Australia has threatened to cut its harvest in half.

Paul Kelly, Director, Food and Drink Industry Ireland, speaking on behalf of the IBBA, said: “Bread bakers are experiencing increases of up to 25% in the cost of flour, the main ingredient in bread. This is on top of increases of over 30% in the cost of gas, the main energy source in baking bread.  Ireland is not unique in this regard,  it is a global problem and it shows no immediate signs of improvement,  if anything it is worsening.”

“While IBBA members are committed keeping prices low, the major increase in the cost of flour comes at a time when other business costs are rising much faster than general inflation. Price rises are the inevitable result of these dramatic upward pressures.  Regrettably there is no alternative option open to the industry in this regard, ” he said.

“Costs in the bread baking sector have already been pared back to a minimum and the industry utilises the most modern production technologies to stay efficient.   In spite of this and over the past two years, a number of Irish bakeries have either closed or significantly rationalised their businesses.  Failure to recoup these now serious cost increases in the market place will inevitably lead to further rationalisation and job losses,” he concluded

“While little can be done to tackle rising prices for internationally traded commodities such as grain, the Government can act to alleviate business costs.  The cost of energy and waste management are just two areas where decisive action is needed.”