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Farmers are sounding the alarm about the potential for a significant 20% increase in food prices, as they grapple with the possibility of cutting back on production due to fuel shortages.
Farmer associations have highlighted the consequences of supply chain disruptions stemming from ongoing conflict in the Middle East, which are escalating manufacturing and transportation costs, thereby hindering daily farming operations.
Diesel, an essential resource for Australian agriculture, is used extensively to operate machinery, power irrigation systems, and transport goods. Prices have recently surged to a national average of approximately $3.20 per litre, as reported by the Australian Institute of Petroleum.
Farmers on the frontline
The meat and dairy sectors are expected to feel the pinch first, given their products’ limited shelf life necessitating swift delivery from farms to stores. Nonetheless, farmers warn that fruits and vegetables won’t be far behind in experiencing similar challenges.
National Farmers Federation President, Hamish McIntyre, noted the timing is particularly challenging as farmers are entering peak periods for planting and harvesting, both of which demand increased diesel usage. In industries like dairy and seafood, daily fuel consumption is vital to keep products moving efficiently.
“Farmers are price takers, which means rising fuel cost are largely absorbed on farm and cut into already tight margins. However, other parts of the supply chain will inevitably pass increased costs onto consumers,” he said.
“We don’t want to speculate what this will mean for families at the supermarket, but if things don’t turn around quickly and farmers are forced to cut production or scale back plantings, it is reasonable to expect that it could lead to pressure on food prices.”
As Australia relies on imported fertilisers, disruptions to global supply routes have pushed prices higher while limiting availability.
Ben Bennett, the President of Australian Dairy Farmers, told SBS News that while industry production has been steadily retracting over the last twenty years, for a multitude of reasons, one of the main issues is that there simply isn’t enough money.
“It’s ideal if we can grow as much pasture as we can, it’s the cheapest form to feed our cows … so these doubling in costs are significant because we’ve really got no way to mitigate that, we’re the price takers.”
The potential 20 per cent increase cited by Bennett factors in both the financial margins of farmers and supermarkets.
He explained that farmers are unable to alleviate the high costs of diesel and fertiliser on their own, and while they won’t shut down completely, they won’t be able to continue at the rate they are.
Urea, a highly concentrated nitrogen fertiliser that is commonly used by farmers for their crops, has soared in price and could climb higher, as much of its global supply comes from the Middle East.
“In Western Australia, there are less than 100 dairy farmers and if they don’t get nitrogen to put on their paddocks to grow the grass for cows to feed, they’re going to lose stock,” Ben said.
He added that with the shortage of diesel, it may not even be possible to transport product interstate.
Action is wanted now, not later
The flow-on effect of these shortages may also mean that farmers have to consider reducing the national heard.
If this were to happen, Bennett said, not only will there be less dairy products but the price of them will increase.
“We’re better off to put a bit of money back toward the farmer now to ensure we don’t have an alternative situation, which will be, I think, a far bigger impact on the consumer.”
He said food price increases will help offset the current financial strains that farmers are facing.
Minister for Agriculture, Fisheries and Forestry Julie Collins said the government is working day and night with farmers, fishers and producers to help manage the impacts of the conflict in the Middle East.
“We’ve taken immediate action to help safeguard Australia’s food production system, and to support our farmers, fishers and producers – including to help get fuel and fertiliser into our regions,” she said in a statement.
“The Albanese Labor Government has practical support that is always available to ensure Australia’s farmers, fishers and producers can access the support they need.
“Our government will never leave farmers behind who are facing hardship.”
Speaking on Sky News on Sunday, she rejected the suggestion food prices would rise by 20 per cent.
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