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Shoppers 'face meat price rises'

28 August 2007 (BBC)

Meat prices are set to increase as farmers pass on the burden of surging costs, a report has suggested.

With wheat prices rising, animal feed costs have almost doubled for farmers, the study by Deloitte found.

The group warned price rises were vital for an industry at "breaking point" after the recent foot-and-mouth scare and floods had taken their toll.

The warning comes days after consumers were told to prepare for rising bread prices as wheat costs hit records.

Bad weather in key grain growing areas such as Canada and parts of Europe has limited supplies as demand has risen, sparking fears of a grain shortfall.

Some of the rising demand has come from the biofuel industry, which uses the grain to produce ethanol for cars.

Widening risks

Wheat prices surged to a fresh record of $7.44 a bushel last week on the benchmark Chicago Board of Trade market in the US, and currently stand at $7.35 a bushel.

"Consumers hold the key to a more resilient future. UK shoppers will have to pay more for their meat," said Richard Crane, food and agriculture partner at Deloitte.

"Increased prices will allow farmers to continue to meet the increasing demand for local, high quality meat."

"Without it, the opportunity to enjoy home-grown quality produce and British meat could become a rarity on supermarket shelves."

Livestock farmer and leading National Farmers Union (NFU) official Martin Howlett told BBC Radio Five Live that while feed prices have more than doubled, returns on cattle and sheep have fallen.

Ten years ago each head of cattle could bring a return of £850 to £700, he said, adding that this now stood at £600 to £700 per animal.

Fair price

But he also said that consumers cannot simply bear the brunt of rising costs and called on supermarkets to share out the profits made from the price of meat on supermarket shelves.

"From a business point of view they can't just put the prices up and hope that the consumer will take the knock," he said.

NFU president Peter Kendall also called on retailers to work with farmers to obtain a fair price for food producers.

"We certainly see some of the retailers in the UK having bigger margins than anywhere else in Europe," he said.

The NFU wanted a "partnership" between retailers and producers that meant "farmers get a fair price, and consumers don't have to pay too much for that quality product", he added.

Meanwhile, the Deloitte report also warned that the industry is not just at risk at home.

The business advisory group said the recent outbreak of foot-and-mouth could prompt other countries to close their door to British exports - an industry worth £493m a year.

A drop in UK meat production, and subsequent falls in exports, would allow rival nations to ramp up their production and gain a "competitive edge" over the UK, the report said.