Associated British Foods became the latest food producer to bow to higher wheat costs by revealing today that it was in talks with Asda and Tesco about increasing the price for its Kingsmill bread brand.

John Bason, the Associated British Foods finance director, told Times Online: “It is not a matter of if but when. We are in discussions with the retail trade.

"We are subject to the same costs pressures as the rest of the industry.”

Mr Bason refused to divulge the extent of the price rise, but it is likely to reflect the 8p increase forced through by Premier Foods last week for its Hovis brand.

A standard white Hovis loaf now costs more than £1 and a standard white Kingsmill loaf costs 96p at present.

Wheat costs worldwide have doubled in the past year after a spate of poor harvests and supply shortages caused by the growing amount of farmland used to grow bio-fuels.

In a trading update, AB Foods said today that profits at its grocery division in the past year had fallen despite market share gains by Kingsmill.

Bread prices have already gone up once this year, in February, but Mr Bason said that the UK was in a “new era” of food inflation given price rises for wheat, vegetables and dairy as well as corn oil and soy oil.

He said: “There are a number of pressures which are not going away. There is a lot more volatility, in terms of weather and there is certainly competition from bio-fuels.”

Shares in the group fell 8.5p to 828.5p as AB Foods added that operating profits over the financial year to September 15 would also be hit by £19 million of currency costs, given the strong pound and weak dollar.

The gloom overshadowed further growth at discount fashion chain Primark, where AB Foods said that sales and profits would be “substantially ahead” of last year.

Like-for-like sales growth at Primark in the past six months was 1 per cent up on the same period a year ago, although the chain was forced to discount summer stock to clear the shelves for its autumn range.

Mr Bason said: “You wouldn’t believe it but even at our prices we can take them lower by a bit. We are ready for autumn.”

Profits from AB Foods’ sugar business were “strongly ahead” of a year ago after a substantial rise in profits generated in China.

Across the group, adjusted earnings are expected to rise in line with expectations.

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