Australia Markets open in 6 hrs 45 mins

Another grocery staple to rise in price as drought bites

Kellogg's has said it needs to increase prices. Images: Getty

The milk and eggs industries have both called for support as Australia’s drought continues to take a toll, and now the cereal sector is also under pressure.

Kellogg’s cereal has revealed it will have to increase prices on its range of cereals due to the drought. The price of corn, wheat, oats and rice has increased as Australia suffers the longest drought in a century.

Coco Pops, Corn Flakes, Froot Loops, Crunchy Nut, All-Bran, Just Right, Nutri-Grain, Rice Bubbles, Special K and Sultana Bran are among the cereals made by Kellogg’s. Prices will increase in July 2020.

“In order to make the most of our great tasting cereals in Botany, New South Wales, farmers from all over Australia have supplied us with high-quality Aussie grains,” Kellogg’s said.

“Due to the unprecedented drought conditions, the cost of these core ingredients like corn, wheat, oats and rice has increased significantly.”

The cereal company said it has attempted to drive efficiencies and absorb costs by investing in solar, but these efforts have not been enough.

Images: Getty

“As a result, we’ve made the tough decision to increase the… price for our cereals.

“We know Aussie consumers are also feeling the pinch – so this is not a decision we have taken lightly.”

It said it has been buying Australian grain for 90 years, and will continue to do so.

Grocery bills rise as Australian drought continues

Kellogg’s is not the only Australian company struggling under drought conditions, with Graincorp (ASX:GNC) seeing its share price fall 0.7 per cent over mid-day trade on Monday.

Its port terminals have seen sharp reductions in exports, with its share price down 16 per cent since the beginning of 2019.

And according to Rabobank, the Australian government will lift grain imports by 50 per cent to deal with lower harvest levels.

“Tough times are getting tougher and the tail of enduring impacts of the drought is getting longer,” Rabobank senior grains analyst Cheryl Kalisch Gordon said.

According to the Australian Bureau of Statistics (ABS), vegetable prices rose 7.7 per cent and fruit went up by 6.5 per cent in the first three months of 2019.

“Drought and adverse weather conditions continue to reduce the supply of a selection of fruits and vegetables, and higher input costs are putting upward pressure on prices for other food items such as poultry and bread,” the ABS said.

Yahoo Finance has contacted Kellogg’s for comment.

Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, property and tech news.