Food prices: Fears of 10 per cent hike due to rising gas prices, poor food harvests and inflation

Australians could see food prices rise by a steep 10 per cent because of a “perfect storm” of factors.

A “perfect storm” of high fuel costs, ballooning wholesale gas prices and pressure on resources has one expert predicting a 10 per cent increase in food costs this year.

Global events such as the Ukraine war and the subsequent ban on Russian oil exports have sent petrol prices soaring, as global oil prices creep over $US120 ($A167) a barrel.

The effect has increased wholesale gas costs too.

Costs have soared 50 times the normal levels, with the east coast’s current cold snap and the collapse of Weston Energy (which supplies 7 per cent of Australia’s eastern market) also increasing household demand.

Australian Industry Group chief executive Innes Willox has called the recent movement “apocalyptic,” with fears they will lead to “chaos for industry and pain for households”.

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An industry executive called recent gas price increases ‘apocalyptic’. Picture: Supplied

“Households will feel the punch from higher default electricity prices from July, and more pain is coming for all,” she said.

Speaking to The Australian, agriculture expert David Williams said that “Covid-related effects alone” would have food companies increasing costs by 10 per cent.

“One-off significant increases in grain costs will drive food inflation and increase the cost of stock feed and therefore beef and other proteins,” Mr Williams said.

“The effect of this will be that the unbelievable success of ­increasing incomes in developing countries will now be undermined by pushing people back into poverty and starvation for others.”

An expert has feared food costs could increase by 10 per cent. Picture: Sajjad Hussain/AFP

Global leaders have previously shared fears of a pending food crisis, with Russia’s war on Ukraine, inflation and reduced exports and harvests to blame.

Contributing to around 25 per cent of the world’s wheat supply, the invasion of Ukraine had already created soaring prices. This was before India implemented an export ban on wheat exports after a heatwave devastated crops.

In late May, International Monetary Fund (IMF) managing director Kristalina Georgieva highlighted food security as a pressing concern.

“We can shrink the use of petrol when growth slows down but we have to eat every day,” she told the World Economic Forum in Davos, Switzerland.

“The anxiety about access to food at a reasonable price, globally, is hitting the roof.”

Kristalina Georgieva said food anxiety will be a growing concern. Picture: Fabrice Coffrini/ AFP

Truck industry facing ‘imminent collapse’

This comes as Australia’s truck industry has shared fears more than one in two freight businesses could be hit with bankruptcy due to cuts on fuel tax credits.

While this year’s federal budget announced a 22.1 cents per litre cut to the 44.2 cents per litre fuel excise, the savings that were previously given to truck drivers were cut short.

Previously, freight companies would receive 17.8 cents back per litre, however this has been reduced to 4.3 cents per litre for six months from March 30.

A survey conducted by the South Australian Road Transport Association (SARTA) found that now 57 per cent of businesses could be facing “imminent collapse” unless the tax credit is restored.

Cuts to fuel tax credits could create major supply chain stress. Picture: Dan Peled/ Getty Images.

This comes as the Australian Trucking Association (ATA) chair David Smith warned that the move could have a flow-on effect on household grocery bills, increasing weekly food costs by around $20.

“The fuel tax credit is a significant component of trucking’s established business model,” Mr Smith wrote in May.

“The food supply chain can only keep shop shelves stocked if operators can offset the loss of the tax credit.

“This will negate the cost of living relief which the Government sought to provide.”

Originally published as Food prices: Fears of 10 per cent hike due to rising gas prices, poor food harvests and inflation