Food Producers Hit as Wheat Hits New Highs

UK - There was more bad news for food companies today as the price of wheat hit new records. Wheat today rose to just above US$10 a bushel for the first time and went up 6.3 per cent in Chicago last week, its fourth consecutive weekly gain.
calendar icon 17 December 2007
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Decreasing supplies because of plummeting output in drought-stricken Australia and lower yields in the US and Argentina have caused headaches for food manufacturers around the world.

Premier Foods, maker of Hovis, and Associated British Foods, which makes Kingsmill and Ryvita, have been forced to put up bread prices. Companies including Kellogg's, General Mills and Sara Lee have also been forced to raise prices to consumers.

Gloomy data from Argentina, where dry, hot weather has forced down wheat yields were the latest blow to the market, which saw wheat futures for March delivery rise by the Chicago Board of Trade's 30-cent daily limit to $10.095 a bushel.

Livestock driver

The wheat price, which has more than doubled in a year, also has a knock-on effect for other food prices as it drives up the price of livestock feed. Analysts say there could be worse to come.

"Global supply is really tight at this time," Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia. "Saying there's a near-term top in the price is a very dangerous thing to do."

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