The Irish Bread Bakers Association (IBBA) has said it will be passing on increased production costs to retailers early in 2007.

In a statement, the organisation - which represents companies such as Johnston, Mooney & O'Brien and Brennans - said that continuing dramatic increases in the international price of wheat had driven the production costs for bread 'significantly higher'.

It blamed poor harvests in Australia, the Ukraine, Argentina and North America, which had pushed the price of wheat to ten-year highs as world stockpiles had fallen to their lowest levels in 25 years.

Paul Kelly, director of Food and Drink Industry Ireland, said bread bakers were experiencing increases of up to 25% in the cost of flour, the main ingredient in bread. 'This is on top of increases of over 30% in the cost of gas, the main energy source in baking bread,' he added. Mr Kelly said there was no sign of any improvement, and if anything the situation was worsening.

He said that while IBBA members were committed to keeping prices low, they could not absorb the cost increases indefinitely and had no option but to pass on the rises.