Rising fuel costs and uncertainty around supply are adding to the pressure facing businesses across the country, with impacts flowing through supply chains and affecting some sectors more than others.

Mounting pressure on small businesses

Council of Small Business Organisations Australia (COSBOA)  CEO, Skye Cappuccio said the impact is being felt across industries, particularly for businesses with limited capacity to absorb further cost increases.

“Many small businesses are feeling the impact of rising fuel costs and uncertainty around supply. It is hitting differently across industries and is often more pronounced in regional areas, but the effects are being felt right across supply chains,” Ms Cappuccio said.

“For businesses operating on tight margins, even small increases in fuel costs can have a direct impact on cashflow and day-to-day operations.”

For many small businesses, fuel remains a core and unavoidable operating cost.

“For tradies, delivery operators, farmers and regional retailers, fuel is not discretionary. It is a daily cost of doing business,” Ms Cappuccio said.

“When fuel prices rise, those costs flow directly into transport, logistics and service delivery, and, where they can, through to customers.”

Ms Cappuccio said small businesses will need governments to be ready to respond if conditions worsen, alongside a continued focus on longer-term policy settings.

“A stable and supportive operating environment is essential to ensure small businesses remain viable and continue to support their communities,” she said.

Reduced fresh vegetable supply

Australian vegetable growers are reducing plantings and opting not to harvest existing crops amid surges in the costs of critical farm inputs and supply uncertainty.

The findings from a snap AUSVEG survey of over 150 growers highlight 27% have reduced or stopped planting schedules due to severe operating uncertainty flowing from the Middle East conflict, and a further 13% are considering their options.

Growers opting to reduce planting have done so by an average of 30%, while 19% had decided not to harvest existing crops due to unviable returns based on production and distribution cost increases, or in some cases inability to access logistics to deliver produce to towns and cities across the country.

As growers scale back production, the flow-on to consumers will start to be felt immediately as supply of Australian grown vegetables reduces, said AUSVEG CEO Michael Coote.

“Australia relies on its vegetable industry to supply 10,000 tonnes of fresh produce to consumers each day, and Australian growers are responsible for supplying 98% of the fresh vegetables consumed by Australian families,” he said.

“It is critically important that all Australians understand the urgency of addressing the severe challenges that vegetable growers feeding Australian families are currently facing.”

Despite the significant surges in production costs, growers reported they had only been able to pass an average of 12% of their recent cost rises on to their customers, raising further serious questions over industry viability and sustainability.

“Australian vegetable growers have no capacity to absorb these latest extreme cost increases after years rising costs and falling returns,” said Mr Coote.

“It is fundamental that vegetable growers receive viable farmgate prices for their produce to allow them to keep growing and supplying the vegetables Australians expect, and this needs to be front of mind for all commercial fresh produce buyers and retailers.”

National food supply chain assessment

This week the federal government announced the commission of a National Food Supply Chain Assessment to help farmers, producers and Australia’s agriculture industry to manage the impacts of the conflict in the Middle East.

The assessment will feed into the work of the newly established Fuel Supply Taskforce, and provide advice to government on practical steps to strengthen preparedness for disruptions to food production and supply chains.

“Our farmers and producers feed millions of people both here and abroad, but events like the conflict in the Middle East reaffirm why we cannot be complacent,” said Minister for Agriculture, Fisheries and Forestry, Julie Collins.

“While Australia is food secure, we recognise the importance of supply chain resilience, including the supply of fuel and fertiliser, which is why we have commissioned this assessment.

The assessment will initially focus on diesel supply chains, and will then expand to other critical agricultural inputs, including crop protection products and fertilisers.

An interim report focused on diesel supply chains will be provided to the Minister for Agriculture, Fisheries and Forestry within one month, with a final report to be delivered by the end of the year.

Rail freight key to supply chain security

The Freight on Rail Group (FORG) has affirmed the important role freight plays in Australia’s supply chain, noting that there is currently adequate fuel supply and no immediate impacts on rail freight operations.

However, global fuel markets are evolving rapidly and the situation in the Middle East underlines the importance of continued forward planning to protect essential freight services.

“Freight rail is an essential service and critical infrastructure that must be prioritised during any fuel supply disruption,” said FORG Chair Geoff Smith.

“Rail moves groceries, medical supplies, liquid fuels and grain, and also supports Australia’s energy exports relied upon by partners such as China, Korea and Japan.”

Rail freight is fuel efficient, able to move up to five times more freight using the same amount of fuel as road transport, making it an important contributor to the supply chain when fuel security is impacted.

The rail freight industry stands ready to assist government by rapidly adding capacity on key East–West and East Coast corridors, allowing freight to shift from road to rail, reducing diesel consumption and strengthening supply chain resilience.

“Prioritising rail freight in fuel allocation and contingency planning is one of the most effective ways to keep essential goods moving in a fuel constrained environment,” Mr Smith said.