CANBERRA (Dow Jones)--Prices of milk, bread and meat could triple in the next five years driven by dwindling world grain stocks and greater demand from producers of ethanol and other biofuels, a grain company executive said. Prices of farm products are pulling out of a long-term decline and could "rocket" in the coming 12 months and in subsequent years, Imre Mencshelyi, Chief Executive of Perth-based Cooperative Bulk Handling Ltd., told Dow Jones Newswires in a recent interview.
Higher food prices are good news for farmers, but bad news for processed food producers as they increase input prices and for retailers, who want to cap prices to keep consumers buying. They also pose a problem for central banks since monetary policy targets broader price increases.
Underlying inflation, which is central to policy making at the Reserve Bank of Australia, was running at an on-year pace of 3% in the third quarter, at the top of the RBA's 2%-to-3% target band and up from 2.8% in the second quarter. The headline consumer price index rose a more benign 1.9% from a year earlier. Big contributions to the CPI in the third quarter came from higher food and housing costs.
Mencshelyi forecast the retail price of a liter of milk could reach A$5 within several years from about A$1.80 now. "The power is returning to the producer," in part reflecting the consolidation of production into fewer hands as many farmers are leaving the land, he said.
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