RISING grain costs are set to drive up the price of chicken - Australia's highest consumed meat - by 3.5 percent in the year ahead, according to the National Australia Bank (NAB).
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While the past four months of rising global grain prices have been a welcome boost to graingrowers' earning prospects, the higher prices are flowing through to other sectors, including the poultry meat and egg industries.
NAB's agribusiness general manager, Khan Horne, said feed grain costs were now 16.6pc higher than at the same time last year and unlikely to ease significantly until at least late 2011.
"Feed costs, which account for about 60pc of total operating costs for chicken meat producers, have risen sharply this year and the large movements in global grain markets are likely to have a significant impact on production," Mr Horne said.
"In the near term, rising costs are likely to be absorbed by producers, however, as the situation continues and prices remain at elevated levels, it is a question of how quickly these costs can be passed on to consumers."
The egg industry's considerably higher costs were expected to erode production by 2pc in 2010-11 and subsequently push up consumer egg prices by around 4pc, with further rises in late 2011.
NAB's latest rural index of farm commodity prices, remained steady in Australian dollar terms during October as the rising dollar offset gains across the commodity classes.
However, it was still significantly higher than the same time last year (20.5pc) and was likely to remain high for the time being according to Mr Horne.
The bank's latest upgrade to the production outlook saw NAB raise its estimate of the gross value of farm production for 2010-11 to $47 billion - up $400 million on October's estimates.
But wheat prices, although up 32pc in the past 12 months, have pulled back recently, hitting their lowest level since July.
An increase of 3.1pc in US dollar terms for global dairy prices in October was offset by the weakness of the currency to see prices remain stable in Australian dollar terms.
Prices are tipped to ease in the coming months with production in Australia and New Zealand approaching seasonal peaks, but Asian demand for milk powder is likely to provide a floor in prices.
The rising dollar saw fertiliser prices fall in October, with the NAB Weighted Fertiliser Index down 3.9pc , but up in US dollar value.
Driving the US dollar result were increases in the diammonium phosphate (DAP) and urea prices, up 5.5 and 5.1pc respectively.
DAP and urea are at their highest prices since October 2008 and are likely to increase as producers seek to capitalise on the current high prices for broadacre crops.
