A fresh surge in wheat prices looked set to heap more pressure on stretched household budgets today after Russia banned grain exports for the rest of the year.
Russia - one of the world's largest exporters - has seen a severe drought wipe out 20% of its wheat crop. The ban will run from August 15 through to December 31.
Wheat prices immediately jumped 60 cents to 7.85 dollars (£4.95) a bushel - the highest since September 2008.
CMC Markets analyst Michael Hewson said prices have surged from a low of 4.25 (£2.68) dollars earlier this year, although they remain well below the peak of the last surge in the cost of wheat, which hit 13.49 dollars (£8.52) a bushel in February 2008.
The move from Russian Prime Minister Vladimir Putin will add to the inflation pressure building in the UK despite sluggish economic growth.
Hovis breadmaker Premier Foods yesterday confirmed it would pass rising prices on to retailers, leading to fears that the shelf price of a loaf of bread could rise by up to 10p.
Premier is sourcing all its Hovis wheat from British farmers this year and, while crops are expected to be bumper in the UK, prices will rise in line with the global market.
Figures from the British Retail Consortium this week showed a sharp increase in the annual rate of food price rises during July, even though inflation is slowing among non-food retailers.
Putin announced the ban at a Cabinet meeting today, saying it was necessary even though Russia has sufficient reserves.
"We need to prevent a rise in domestic food prices, we need to preserve the number of cattle and build up reserves for the next year," he said during the televised meeting.
Despite the ban Russian farmers have little incentive to export anyway because prices have been rising even faster in Russia than in world markets.
The majority of the damage to Russia's wheat crop has been caused by the drought, one of the worst in decades as much of the country suffers through the hottest summer since record-keeping began 130 years ago.
But wildfires raging through much of western Russia have spread into farmland and there are fears that more fields will be lost.Reuse content