One of Britain's biggest food producers said yesterday that the worst of this year's inflation in food prices could be over soon.

Associated British Foods (ABF), home to Silver Spoon sugar, Kingsmill bread and Twinings Tea, said that the price of global commodities such as corn oil, wheat and dairy had begun to level off or fall.

The group is poised to bring down the price of Mazola oil, one of its biggest-selling vegetable oils, for the first time for more than three years.

Corn oil prices in the United States have fallen from 90 cents a pound to 60 cents a pound in the past four months as experts predict an oversupply on the market. Soya prices have fallen in line with crude oil prices, while wheat prices dropped to year-lows on all three American futures exchanges last week.

John Bason, the finance director of ABF, said: “We are at a very interesting point here. I think that the worst of commodity price inflation is behind us. Looking ahead, it's too early to say what will happen, but we are going to take Mazola down later this month.”

The comments came as official figures showed that input price inflation at food manufacturers across Britain had eased in August to 15.9 per cent, from 19 per cent in July. Nevertheless, output inflation continued to climb, with the price of food and beverage products rising by an average of 11.4 per cent last month, up from 10.8 per cent in July.

Sharp increases in the cost of global commodities, such as wheat and dairy, earlier in the year fuelled a big rise in the price of everyday supermarket staples such as bread, milk and butter.

A survey by The Grocer magazine at the weekend showed that the price of loose apples had risen by an average of 26 per cent in the past year, that of pork chops by 45 per cent and dried spaghetti had doubled in price. Kingsmill sliced white bread, one of ABF's bestselling products, has leapt by 30 per cent to £1.22.

However, there have been signs of a correction. Waitrose, the supermarket chain, said last week that prices of some fruit and vegetables had begun to ease, with broccoli down 20 per cent and cabbage down 8.5 per cent.

Mr Bason said that while global wheat prices had eased, it was too early to say when bread prices in the supermarket may come down, given that the poor summer weather meant that most of Britain's wheat harvest would be used for animal feed rather than milling. He added that energy costs remained a concern.

In April Mr Bason said that it was too early to say that the world had entered an era of higher food prices, given that the pressures on commodities differed. He pointed out that sugar prices had doubled in 2006, but then halved in 2007 as production increased. Australia is expected to produce a bumper wheat crop this year as more farmers planted wheat because of higher prices.

In a trading statement yesterday, ABF said that it fully expected to meet full-year profit targets, despite a 150 per cent increase in net debt after an aggressive expansion drive. Higher prices and volumes are expected to push up profits in its grocery division. Shares in the group rose p to 790p.

Hopes raised of early rate cut

Prices charged by British factories fell at the fastest rate in 22 years last month after the price of oil and scrap metal tumbled.

The upbeat figures, which signal that inflationary pressures are easing, will heighten hopes of a cut in interest rates soon. The Bank of England has indicated that it will not cut rates until it sees evidence that inflation, which is at a 16-year high of 4.4 per cent, is retreating.

Factory gate prices fell by 0.6 per cent during August, the fastest rate of decline since the series started in 1986, official figures show. This takes the annual increase in prices to 9.7 per cent, down from a 10.3 per cent rise in July. Core producer output prices, which exclude food and energy products, fell by 0.1 per cent – the first decline in nearly three years.

Manufacturers’ costs also fell during the month, with input prices tumbling by 2 per cent, although the 26.2 per cent annual growth in costs remains nearly a third higher than this time last year.

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