September 5, 2007

High grain prices set to hike Australian meat costs

Grocery prices in Australia already inflated by drought are set to rise further as soaring world grain prices push up the cost of producing bread, eggs, meat and milk.

While the full extent of the increase will not be known until harvest time in coming months, industry players have already warned tight margins will have some cost increases passed on to consumers.

With crops in the Eastern States and parts of the Wheatbelt depending on good rains in coming weeks, a poor end to the season could push up the price of grain even higher than the record 800 cents a bushel, or US$360 a tonne, that it was being traded for late last week.

Consumers will be asked to pay more for meat, with cattle lot feeders needing another 60 cents per kilogramme for premium grain-fed beef to cover rising costs. The rise translates to a US$2.50 per kg increase on shop shelves.

Pork producers are also facing a 15 percent increase in costs but claim fierce competition with imports had resulted in reduced farm gate prices over the past five months.

Great Southern Pig Company production manager Richard Evison said pork prices needed to lift or the cost-price squeeze would drive farmers out of the industry and customers would be left with more imported product.

David Lock, chief executive of Western Australia's biggest pork processor, Craig Mostyn Group, said there was little scope to pay growers more.

The Australian Chicken Meat Federation has warned of price rises for chicken, with feed costs accounting for 60 percent of total business costs.

Commercial Egg Producers Association of WA president John Simpson said costs would be passed on to business customers. Des Griffiths, chief executive of WAs biggest lamb processor WAMMCO, said high grain prices and rising world demand for grain from the biofuels industry would have a longer-term impact on the States lamb industry.