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 the nation’s food and grocery suppliers and manufacturers. 

As the conflict in the Middle East continues to destabilise global markets and fuel prices remain stubbornly high, the AFGC is highlighting 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% of global seaborne oil trade, 20% of LNG trade and up to 30% of traded fertilisers. Following the February 2026 escalation, tanker traffic collapsed by more than 90% within days of the blockade,” said the AFGC. 

“This has resulted in skyrocketing Brent crude oil prices, up 39% year-on-year to March 2026 and have risen 43% between February and March alone. Container freight costs have also risen 22% year-on-year to March 2026, 30% 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 interest rate hike in May, 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 on how commodities such as oil dictate more than just transport costs. Petroleum-based products are foundational to the industry, appearing in: 

• Packaging: Most food-grade plastics and films are oil-derivatives. 
• Essential Goods: Everyday items like nappies and tissue boxes rely heavily on synthetic components tied to oil prices. 
• Manufacturing: High-heat processing and refrigeration are energy-intensive operations currently facing record utility costs. 
• Global shipping: Australia’s place often at the end of global shipping lanes lessens availability of cargo space, often reflected in the price of containers and freight. 

“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 relied on by Australians,” said the AFGC. 

“However, the reality is one end of the supply chain cannot bear all these costs alone. Wheat, for example, is up 8% year-on-year and 11% between February and March 2026, and soybean oil prices up 52% year-on-year, driven by both energy-linked biodiesel demand and supply constraints. 

“This sheer range of cost pressures – from grain prices to plastic bottles and transport – 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 Mr 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 a level of viability, the impact will be felt most heavily in regional communities where 30% of the sector’s manufacturing workforce is based. 

“Our sector has the lessons of Covid-19 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 a robust, world-class industry that is keeping Aussie shelves and homes stocked with the essential products we know and love. 

Additional data points

• Packaging inputs are under sustained pressure, with polyethylene prices up 6% year-on-year, 25% between February and March 2026, and 28% since late February.  
• Polypropylene is up % year-on-year, 30% in March, and 33% since late February – directly impacting food containers, bottle caps and takeaway packaging. 
• Fertiliser markets have been particularly affected, with urea prices up 67% year-on-year to March 2026, including a 39% rise between February and March. As of early May, urea remains 26% higher than pre-blockade levels. Around 60–70% of Australia’s urea imports originate from the Middle East, leaving supply highly exposed to Strait of Hormuz disruptions. 

Reference: afgc.org.au/industry-pulse-middle-east-conflict-impacts-tracker.