Australian Food Prices to Skyrocket

October 24, 2007
Cattle Network

CANBERRA (Dow Jones)--Prices of milk, bread and meat could triple in the next five years driven by dwindling world grain stocks and greater demand from producers of ethanol and other biofuels, a grain company executive said.

Drought pain is coming to dinner tables nationwide as rising farm costs bite deeply into family budgets.

The price of bread, milk, eggs and meat is set to rocket on the back of high grain costs.

Winter crop forecasts have been slashed by 30 per cent, and there are signs desperately needed spring rains could fail.

And former deputy prime minister John Anderson yesterday raised the spectre of a possible global "food shock".

"We talk about oil shocks. We have gone on assuming that the supermarket shelves will always be loaded," Mr Anderson said.

Retailers said bread would jump by up to 30c a loaf and milk could rise by 20c a litre.

Eggs are almost certain to rise by at least 50c a dozen, while the price of bacon and other pork products could climb by up to $2 a kilogram.

The price of feed grain increased from a three-month average of $290 per tonne to a peak of $490 per tonne on Monday.

A report for the Australian Egg Corporation predicted it would stay above $350 for some time.

"These prices don't seem to be abating," AEC managing director James Kellaway said.

"All the feedback from my members is such that they can't afford to not increase their prices."

Bakers Delight, which has more than 600 stores nationally, said it was anticipating a 30 per cent jump in the price of flour by January, after a 30 per cent jump this year.

"That means an increase of around 20c to 30c a loaf," chief financial officer Richard Taylor said.

"It's an absolute concern, but you can't do anything about it."

Goodman Fielder, which owns brands including Country Life and Helga's, said its prices would rise.

"Wheat prices are at record highs," spokesman Ian Greenshields said.

"You try and absorb as much of the costs as you can, but part of this has to be passed on."

Dairy giant National Foods said the drought was having a double impact on milk prices.

Spokesman Rupert Hugh-Jones said pasture levels were down, which lowered production. And the skim milk, butter fat and cheese markets were also attractive to dairy farmers, which reduced local volumes of milk.

"Our wholesale price of milk might rise by up to 20 per cent over the next six months," he said.

Australia Pork Limited CEO Andrew Spencer said the industry was facing its worst trading conditions in living memory, and prices would rise.

"It could be a couple of bucks a kilo across the board but it is very hard to judge because of the impact of supply and demand over time," he said.

Eating out is also set to become more expensive.

Restaurant and Catering Australia said higher produce prices would be passed on to customers.

Mr Anderson, a former federal leader of the Nationals, yesterday warned of possible global food and grain shortages.

"This comes at a time of unprecedented concerns globally of very low grain stocks," he said.

"It is not beyond the realms of possibility that we will see a food shock in the next few years."

Thousands of farming families are weighing up whether to stay on the land or take $150,000 exit grants now offered by the Federal Government.

Prime Minister John Howard denied he was paying farmers to walk away. "We're helping people who've reached a rational decision, because of the desperate difficulties of farming their particular properties, to try something else in their career."