London, July 13 - Britons will soon be spending more on their morning toast and Italians forking out more for their evening spaghetti as wheat markets soar in Europe, stoking fears of food price inflation.
International wheat prices are at their highest for more than 10 years on a mixture of tight supplies caused by drought around the world and increasing demand thanks to more and more grains being used to make biofuels.
In Europe, the wheat price has jumped to almost 190 euros a tonne from around 130 euros in a little more than three months.
Bread and pasta makers now say they are forced to pass those costs on to the consumer.
Britain's Premier Foods, owner of the Hovis bread brand, said this week the wheat costs this spring would likely force a rise in the price of a loaf soon.
"We anticipate that we will need to recover the increased wheat costs we have seen since February through pricing in the coming weeks," the company said in a trading update on Monday.
Britain's millers need 5.5 million tonnes of wheat a year to make the 4.5 million tonnes of flour for the 12 million loaves sold each day in the country. Local wheat prices have jumped to 130 pounds a tonne from 80 pounds in the last year.
"These price hikes in food are likely to trigger inflation in food prices as processors are forced to pay increased costs for basic ingredients," said Mark Hill, food and agriculture partner at consultancy firm Deloitte.
But Hill noted that wheat costs represented just 10 percent of the price of a loaf, reducing the impact.
"Whilst wheat prices have increased by 50 percent, the effect on bread prices is moderate," he said.
"This means for every 10 pounds per tonne increase in the wheat price, the cost of making a loaf of bread is likely to increase by 1 pence."
And in France, the wheat growers association AGBP said the rise in the wheat price since the second half of last year has had an impact of just 1.2 per cent on the price of a baguette.
PASTA CRISIS
Italian pasta makers said their sector was on the edge of crisis after a 30-40 percent the surge in durum wheat this year.
"Rise of durum wheat and semolina (durum flour) in the last few weeks ... threatens a crisis for one of the most solid sectors of 'Made in Italy'," the pasta makers union Unipi said.
Italy's Barilla, the world's biggest pasta maker, has already raised its prices for bakery products and plans to increase pasta prices in autumn along with many other producers.
Grain accounts for more than 50 percent of the costs to make pasta. A half kilo of pasta which costs about 0.50-0.80 euros.
Unipi said price hikes would threaten competitiveness of Italian pasta on international markets dealing a heavy blow to the industry which earmarks 53 percent of its output for export.
De Cecco has raised prices by 10 percent this year and plans further increases, said its head of purchases Mario Aruffo.
And as grain-based animal feed becomes more expensive, prices for meat could also be heading up, Deloitte's Hill said.
"Dairy and livestock producers may well struggle in this environment," he said.
In Spain, which has a major feed sector, prices are rising.
"Our feed prices have been rising steadily since October last year," said a source at one of Spain's big feed makers.
"Since January we've increased prices by about 30 euros a tonne. That's about 15 percent for most of the feed we sell."