New international benchmarks on the prices of cereals yesterday showed there will be no respite in inflationary pressures caused by price hikes in foods containing cereals, as well as in meat and dairy products which, in turn, depend on cereals for animal feed.

The international price of cereals, in fact, is expected to continue surging this year, offering little relief for European and indeed Maltese food prices, which have been hard hit over the second half of this year.

With December contracts for delivery expiring on Friday, the futures market for deliveries in March 2008 yesterday became the new benchmark. The new benchmark, up to seven per cent higher than that of December, showed record prices for contracts for cereals to be delivered in March – a phenomenon expected to place further inflationary pressure on food prices.

The new trickle-down effects are expected to hit consumers and take their toll on inflation rates over the coming months. A price monitoring survey carried out recently by the Union Haddiema Maghqudin has already showed stiff increases in Malta in foods dependent on cereals and grains – especially breakfast cereals, bread, rice, cheese, flour, yoghurt, pizza, pasta and chicken breast.

Following yesterday’s new benchmark, analysts are forecasting a second wave of food price inflation next year to hit the European Union and other leading economies. A first wave of skyrocketing cereal prices had hit the wholesale market this summer – trickling down through the supply chain and contributing to rising food price inflation.

In addition to the price hikes noted by the UHM, the skyrocketing price of flour had earlier this year even led Maltese bakers to threaten halting the production of the price-regulated Maltese hobza, which was avoided only after the government approved a one cent per loaf price rise and an increased subsidy against the price of flour paid by bakers.

The higher international cereal prices are due to high demand, poor harvests and low stockpiles. Emerging countries’ better fortunes of late, particularly China, are also boosting consumer consumption of meat and dairy products while an increase in the production of biofuels has also contributed toward sending cereal prices upward.

In Chicago yesterday new international wheat prices were more than seven per cent higher than the December benchmark, reaching an all-time high. Corn rose by over five per cent to 11-year highs and soya bean prices hit 34-year highs. Rice yesterday also reached an all-time high.

The US Department of Agriculture, meanwhile, predicts global wheat stocks this year to reach their lowest levels in at least 47 years, while corn stocks are expected to reach 33-year lows.

Given record prices coupled with record low stocks, the EU’s recent move to curtail prices through lifting import tariffs may not prove to be enough to dampen the effect. The EU is the world’s top importer of wheat and one of the largest buyers of soya bean and corn.

The increase of eurozone food price inflation to 4.3 per cent last month was one of the main reasons for the hike in the zone’s annual inflation rate from 2.6 per cent in October to 3.1 per cent – its highest in six years.

Officials in the US, the world’s biggest wheat exporter, have forecast their lowest wheat levels in 60 years for the 2007-2008 crop year. Cold weather has meanwhile damaged crops in Argentina, while drought has affected Australia’s wheat production and flooding has damaged European crops.

In a bid to curtail the steep upsurge in European cereal prices, and the ensuing ripple effect on consumer goods in Malta and the rest of the EU.

The EU – noting a “spectacular upsurge in prices” in the prices of cereals since the start of the 2007/08 season – has suspended import duties on all cereals, except oats, for the current marketing year ending on 30 June, 2008.

Total stocks of cereals in the EU in July had already stood 13.2 million tonnes below the previous year’s levels following a poor harvest in the 2006/2007 year. This year, meanwhile, unfavourable weather conditions have spelt out a further 3.5 per cent, or a 10 million tonne, decrease, meaning output is declining while stocks are already at lows.

Exemplifying EU cereal stock turmoil, since the start of the new marketing year the price of milling wheat in Rouen has risen from e179 per tonne to almost e300 per tonne at the start of September 2007.

In Germany, bread-making wheat was selling at 70 per cent higher than the previous year by mid-August, while market prices for feed barley have increased in the wake of rising wheat prices.

On the French market, feed barley has more than doubled over the summer 2006 rate, which has, in turn, triggered a rise in demand for maize for animal feed. French maize prices in Bayonne followed the same trend, rising from e183 per tonne at the start of the new marketing year on 2 July, 2007 to a peak of e255 per tonne in mid-September 2007.