Morrisons: price of bread and milk is only going to rise

Food inflation is a menace and it is only going to get worse, Morrisons finance director Richard Pennycook warned today.

He said a price war was the only thing keeping bread, milk and other staples affordable.

The company's statement to the stock market on its third quarter sales makes mention of a "continuing upturn in commodity prices".

Pennycook said: "Wheat is up 60% this year. We are seeing the same with grain, oil, sugar and tea. Yet the prices on the shelves are at historic lows."

This can't continue, he reckons: "Everyone would hope that some of these pricing pressures ease back. The hedging programmes that suppliers have in place don't last for ever."

Morrisons sales are up 2.8% in the quarter, a slower rate of progress than it has managed lately.

The UK's fourth biggest supermarket says times remain hard for the consumer. Pennycook added: "It's a difficult environment. People will enjoy Christmas but 2011 will be all about value."

Clive Black at Shore Capital said: "Sales momentum has demonstrably decelerated ... and market share growth is now more mellow."

He expects Morrisons to make a profit for the year of £859 million. The shares fell 7.1p to 280.8p.