Grain prices have increased by 80 per cent over the past year, and grain represents the major part of chicken feed, for which there is no substitute, warned the Australian Chicken Meat Federation in a statement this week.
Feed in turn makes up more than 60 per cent of the production costs.
"The two predominant grains in chicken feed, wheat and sorghum, account for approximately 65 per cent of the feed, with corn, barley, oats, proteins and vitamins making up the balance. With the unprecedented rise in the cost of grain, chicken producers are experiencing a substantial increase in production costs," said Dr Andreas Dubs, executive director of the association.
The drought in Australia is having a knock-on effect on many sectors of the food industry. It has already pushed global wheat prices up to a 10-year high and may also lower the country's milk production. Wine growers are meanwhile facing lower yields during next year's vintage, as well as frost damage to vines.
The price of chicken meat has decreased steadily over the past 40 years, noted Dr Dubs, but drought will force them to increase prices.
"The current drought is putting extreme pressure on the industry which can be expected to result in significant price increases for chicken meat, from whole chickens right through to further processed products," he said.
Lower grain stocks as a result of the drought may also bring a decline in poultry numbers in Australia, as processors fail to feed current birds with a lower domestic feed supply.
International grain prices are also high so this is likely to restrict imports, as well as concerns over quarantine. However some national media have reported that import permits have already been granted for wheat. Some believe that wheat imports are now a certainty, following AWB's further cut to its forecast wheat production yesterday.
The country's wheat exporter said production for this financial year would drop to 9-11 million tonnes, down from the September estimate of 12-15 million tonnes. Average wheat production is 20.9 million tonnes.