Food inflation is set to continue in the rest of the year.

Food inflation is set to continue in the rest of the year.Credit:Getty Images

Australia’s largest poultry supplier,Ingham’s,has announced it will pass higher costs on to its customers,which will push up retail prices of chicken,one of the most affordable proteins.

“We are talking to customers in all our channels,whether that be retail,quick-service restaurants,food service customers,butchers and the like;so we’re having to pass on increased prices right across the market,” Ingham’s chief executive Andrew Reeves said.

“Those customers will inevitably pass some of those prices on to consumers,which is already starting to be apparent in the marketplace.”

Ingham’s price hikes will be felt in the supermarkets,as well as restaurants,cafes and pubs.

Ingham’s price hikes will be felt in the supermarkets,as well as restaurants,cafes and pubs.Credit:

Australian Chicken Meat Foundation executive officer Dr Vivien Kite said chicken processors were under pressure from rising input costs including feed,transport and energy costs,which have surged by about 15 per cent 20 per cent since the beginning of the year.

“Wheat is the biggest ingredient in chicken feed,so you can imagine that that has had a very significant impact on the price of feed generally,and therefore the price of producing chicken,” she said. “Feed costs represent somewhere between 50 to 60 per cent of the total cost of producing chicken.”

Farmgate prices of raw milk have also risen,exacerbated by record-high global dairy prices,which has forcedColes and Woolworths to raise milk prices by as much as 60 cents in their supermarkets.

Advertisement

This will have a ripple effect on dairy products in general. Prices are already up for fridge staples such as butter,cheese,cream and ice-cream,according to Frugl data.

The price of margarine has risen the most,up 51 per cent since August last year,while cooking oil and chips now cost 33 per cent more than a year ago. Milk,peanut butter and feta is costing more than 14 per cent than it used to,while butter is 12 per cent more expensive,Frugl data shows.

Dairy and food giant Bega executive chairman Barry Irvin confirmed it was lifting prices “across all channels”,which includes milk,cheese,yoghurt,spreads and jam,juices,and more.

Restaurant supplier United Foodservice managing director and Foodbomb supplier Ayman Zoghaib expects dairy prices to lift by 40 per cent in the next 6 to12 months.

“I feel sorry for the[food producer],they’re going to have to be more conservative on how they make their products,probably shrink the size or put up their prices dramatically.”

Bega is passing higher costs onto customers through its products.

Bega is passing higher costs onto customers through its products.

However,National Farmers Federation chief economist Ash Salardini pointed out milk prices were coming from a historically low base. Cooking oil prices would also remain elevated,he said.

“The[Russia-Ukraine] uncertainty is going to create risk and with risk,increased costs,” he said.

Another La Nina would create veggie shortages - again

While the price of fresh produce such as vegetables and fruit have come down from recent peaks (KFC was had to substitute cabbage for lettuce,while some Subways did without it),thelikelihood of another La Nina event at the end of the year threatens to cause more shortages and supply chain disruptions along the eastern seaboard.

Perishable foods would be most affected if La Nina caused flooding,as it did earlier this year.

“If it rains at the wrong time - if it rains just before and during harvest,[there will be] issues around grains and legumes and things like that as well,so it’s going to be a pretty broad impact on plant-based products,” said Salardini.

Fresh produce such as lettuce and eggs would also be affected,said Edith Cowan University associate professor Flavio Macau,a supply chain expert,as flooding would once again create delays in local supply chains.

“Those delays usually are what makes empty shelves,” said Macau. Supermarket giants such as Coles and Woolworths tend to work with fewer but larger suppliers,meaning less of a buffer when those supply chains are disrupted,he said.

Amid warnings of more frequent unusual extreme weather events,shoppers should get used to bare supermarket shelves from time to time,Macau said.

“We can expect now that this year it might be a bushfire,next year it will be a flood,god knows when a hurricane or a typhoon will come and hit the wrong place.[We’re] not preparing for the end of the world,but prepare for these disruptions becoming more frequent ... and learn to live with that.”

Further shortages in fresh produce will also create higher demand for frozen vegetables,a trend Woolworths has observed.

Loading

“We are seeing some customers trade down from beef into more affordable sources of protein and trade across from fresh vegetables into more affordable frozen and canned offerings,”Woolworths chief Brad Banducci said on Thursday.

Another severe COVID-19 wave would be “very difficult” to withstand for Ingham’s,whose operations have still not fully recovered from the January Omicron wave due to labour shortages. The poultry supplier was forced toreduce some product lines and pull back on manufacturing volumes amid COVID-related absenteeism,which also meant the ASX-listed company had to pay higher temporary wages.

Over the past 2.5 years,food suppliers and retailers have been forced to become accustomed to supply chain uncertainty.

“We’re sitting on a record amount of stock,just to make sure we have consistency in the market and to ensure we have a supply for our customers,” said Zoghaib. “It’s costing a lot of money and it’s putting a lot of pressure on cash flow at the moment.

“If you speak to me next week there will be another new product I can’t get.”

The Business Briefing newsletter delivers major stories,exclusive coverage and expert opinion.Sign up to get it every weekday morning.

License this article

Most Viewed in Business

Loading