KEY POINTS:
Staples of the Kiwi shopping basket such as bread, butter and cheese, as well as treats such as chocolate and icecream, are set for big price hikes, the food industry is warning.
Whether you blame biofuels, the Australian drought or China's newfound love of cakes and New Zealand dairy products, the trickle-down effect of worldwide hikes in prices for basic commodities is going to hit us in the pocket, almost certainly before Christmas.
Significant price rises will affect almost any product made of grain or milk.
Fonterra raised the price of wholesale butter 23 per cent last week, an increase supermarkets say could be passed on to consumers within weeks. And sky-high wheat prices worldwide are set to send the cost of bread soaring by about 20 per cent.
Laurie Powell of George Western Foods, producer of Tip Top bread, said new prices were likely to kick in as soon as contracts with supermarkets could be renewed.
"Rises in the price of bread are going to be significant, rather than gradual," he said. Manufacturers had previously tried to absorb costs but with "massive, massive jumps" in wheat prices, they now had no choice but to pass them on.
About 70 per cent of our wheat is imported from Australia or Canada. It costs $190 a tonne a year ago, now it cost $350-$360, Powell said.
Australia's persistent drought had cut the wheat supply there almost in half and farmers converting to maize to make biofuels also had a big impact on world markets.
Powell said a supermarket chain moratorium on price changes during December and January meant consumers were likely to feel the price hikes before the end of November.
Rob Chemaly of Foodstuffs, operator of Pak'n Save, said the company had started seeing big price hikes from suppliers.
"It's going to affect prices of items sold in supermarkets - flour, bread and dairy products, like we have already seen with milk."
Progressive Enterprises, owner of Woolworths and Foodtown, confirmed some of its suppliers had already indicated price increases for products made with milk or grain.
This would cause "some price inflation" in coming months, a spokeswoman said.
Fonterra Brands New Zealand said the international commodity price of butter had caused the rise here.
A spokeswoman said the commodity price had more than doubled in the past year from US$1600 (NZ$2160) a tonne to US$3700 a tonne.
Smaller food companies spoken to by the Herald on Sunday said they were being stretched by the ever-increasing prices of milk and grain.
Boyd Wilton, CEO of Te Mata Cheese Company in Hawkes Bay said he had just received a three-month "wash up" bill from Fonterra for milk which was up 18 per cent. He said his milk costs had gone up a massive 55 per cent in a year, and he anticipated the price of cheese would soon be forced up by anywhere between 15 and 35 per cent.
Richard Smyth, the commercial manager for Rush Munro's Icecream said while companies were now absorbing costs, it could not go on much longer.
"We have no option but to pass the costs on". He believed the price of icecream could go up around 15 per cent.
Brenda Cuttress of the Food and Grocery Council said the price of coffee, cocoa and sugar had gone up internationally, which would have a flow-on effect to a wide variety of products, such as chocolate.
Michael Gray, who is on the board of the Baking Industry Association, said rises in the cost of ingredients meant that by Christmas consumers could expect to pay more for everything from bread to biscuits and cakes.
Fonterra said there was no plan to increase milk prices again, but that would continue to be reviewed.
Statistics New Zealand figures showed the average price for two litres of milk had risen from $2.61 in March, to $2.92 in August.
