AUSTRALIA | The Australian Food and Grocery Council (AFGC) has warned that a “perfect storm” of global conflict, surging energy costs, and domestic economic pressures is forcing an unavoidable reckoning for suppliers and manufacturers.
As the conflict in the Middle East continues to destabilise global markets and fuel prices remain stubbornly high, the AFGC highlighted the unprecedented strain on the supply chains that keep Australian pantry shelves stocked and homes running.
The Strait of Hormuz, a critical energy chokepoint, previously carried approximately 30 percent of global seaborne oil trade, 20 percent of LNG trade and up to 30 percent of traded fertilisers.
Following the February 2026 escalation, tanker traffic collapsed by more than 90 percent within days of the blockade. This has resulted in skyrocketing Brent crude oil prices, up 39 per cent year-on-year to March 2026 and have risen 43 percent between February and March alone.
Container freight costs have also risen 22 percent year-on-year to March 2026, 30 percent between February and March, amplifying landed costs across imported inputs, including packaging, fertilisers and finished goods.
The compounding effects of these global events, combined with the recent May interest rate hike, mean that suppliers can no longer weather soaring production costs alone.
While the COVID-19 pandemic disrupted logistics, the current crisis has hit harder and is expected to last longer.
“What we are seeing now is deeper than a temporary logistics bottleneck,” said Colm Maguire, Chief Executive Officer, Australian Food & Grocery Council.
“This is a fundamental shift in the cost of doing business. From the fertilisers used on our farms to the fuel in the trucks that transport and the energy powering our factories, every single link in the chain is more expensive.”
The AFGC is working to educate consumers that commodities such as oil cost more than just transport. Petroleum-based products are foundational to the industry, appearing in packaging, essential goods, manufacturing and global shipping.
For months, Australian manufacturers, suppliers and retailers have absorbed these increases as much as possible to protect consumers during a cost-of-living crisis, while continuing to deliver essential products Australians rely on.
However, the reality is that one end of the supply chain cannot bear all these costs alone.
Wheat, for example, is up 8 per cent year-on-year and 11 percent between February and March 2026, and soybean oil prices are up 52 per cent year-on-year, driven by both energy-linked biodiesel demand and supply constraints.
This sheer range of cost pressures means that these industries cannot remain viable without the entire supply chain playing a role.
“Retailers and suppliers cannot continue to swallow these increases without a long-lasting impact on our industry,” said Maguire.
“To protect jobs, livelihoods, farms, and to ensure the sustainability of Australian manufacturing, profitable operations are not a luxury; they are a necessity for Australia’s domestic sovereignty.”
AFGC research provides a stark fact base: if the industry cannot maintain viability, the impact will be felt most heavily in regional communities, where 30 percent of the sector’s manufacturing workforce is based.
“Our sector has the lessons of COVID19 to shape decisions when major, lasting disruption hits, and we have proven how resilient and dynamic we can be. The sector, and the community at large, is rightly proud of the food and grocery manufacturing sector we have in this country – now more than ever we can all play a part in keeping it going.”
The AFGC remains committed to working with the entire industry to ensure the Australian food and grocery sector remains robust and world-class, keeping Aussie shelves and homes stocked with the essential products.
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