For anyone in the Australian foodservice and procurement industry, the last 24 months have felt like a constant battle against the price increase notices. While the headlines often focus on the supermarket checkouts, the underlying reality for the supply chain is far more complicated.
Understanding why food costs are rising is the first step in working with them. Based on recent data from ABARES and the ACCC, here are the four primary levers driving the current food inflation cycle:
- The ‘climate tax’ on production.
- Global supply chain and logistics.
- Agriculture and perishable goods.
- Regulatory scrutiny and retail conduct.
The ‘climate tax’ on production
Climate change has moved from a future risk to a line item on every farmer’s financial spreadsheets. According to Farmers for Climate Action, extreme weather events (including cyclones, floods, and unseasonal droughts) are leading causes of sudden and random price spikes.
“Our farmers are also telling us they’re getting more frequent and severe mini-droughts…”
—Verity Morgan-Schmidt, CEO, Farmers for Climate Action
There’s a couple of core reasons why this translates into higher costs:
- Yield uncertainty creates a sustained supply gap. For example, when a flood hits the Lockyer Valley, it doesn’t just destroy the current crop. It also delays the next planting cycle.
- Farmers are future-proofing food production by investing heavily in climate resilient technology. This significant capital expenditure eventually flows through to wholesale prices.
Global supply chain and logistics
While Australia is an island, our food prices are still tied to global benchmarks. Even if we produce enough beef or grain domestically, export parity pricing means the domestic price is directly benchmarked to what the product sells for on the world market.
Our reliance on imported fertiliser and fuel also keeps these costs high and volatile. Jolyon Burnett, Chair of the NFF Horticulture Council, pointed out on ABC News that this hits farmers at every single stage: “Anything that requires diesel for harvesting, sowing, spraying, long-distance driving… it’s all the things that oil is a component of, and fertiliser.”
And as Procurement and Supply Australasia (PASA) notes, the current fuel crisis is a major threat to national food security, as transport accounts for a significant portion of the landed cost of fresh produce. We see trucks all over the roads with the sign ‘Without trucks, Australia stops’, and it’s just now we’re seeing just how true that could be. With fuel shortages raising prices, many suppliers are trying to cut costs by streamlining freight and passing on direct fuel costs to delivery fees.
Of course, these costs bleed into our wholesale pricing. Even more so when you consider perishability.
Agriculture and perishable goods
Unlike other industries that can pause production or wait to send a later truck when costs get too high, agriculture is on a ticking clock.
As Jolyon Burnett noted in the above-mentioned ABC News interview, farmers with highly perishable goods (like dairy or fresh greens) simply don’t have the luxury of waiting for a better logistics deal:
“You can’t wait until your diesel tank is cheaper to top up. You can’t hold it back. You have to harvest at that time and then transport it to the distribution centres.”
This explains why we see sudden jumps, like Norco recently having to raise prices by 5 cents per litre just to keep up. And it’s even tougher in our regional areas where they pay more to have fuel and fertiliser trucked in, and then pay those same inflated transport costs to send their produce back out to the major distribution centres. Even when production volumes are rebounding, this logistics hike keeps the cost of bringing food to market at record highs.
Regulatory scrutiny and retail conduct
The ACCC’s 2024-25 Supermarket Inquiry shed light on how market concentration influences what you pay. It highlighted that Australia’s grocery sector functions as a highly concentrated oligopoly, with Woolworths and Coles commanding roughly two-thirds of national sales. As the primary buyers for most of the country’s agricultural supply, they routinely squeeze wholesale costs from farmers, pocketing those savings as corporate profit rather than passing onto consumers at the checkout.
For procurement professionals, this underscores the importance of supplier transparency. If a supplier issues a price increase notice, is it reflecting a genuine rise in production costs, or is it margin creep?
Many of us would like to think that farmers can get a decent cut as fair payment, and it’s for this reason it’s crucial that food service businesses are clear on the processes of their suppliers. Buylink Services has relationships with local suppliers who also have downstream values and relationships with farmers. These relationships are vital to the consistency of produce, certainty of supply, and creates a steadier pricing mechanism. Additionally, our quarterly business reviews assist with predictive issues in various supply chains. For example when we saw climate events impacting Australian flock and herd sizes in lamb and beef markets, we were able to provide insight for our clients for how this should play out on menu planning.
Labour shortages and skills gaps
Of course, the cost of food must reflect the labour that pick, pack, and process it, and transport it through the supply chain.
According to the ABARES 2026 Snapshot, while production is bouncing back, the cost of labour remains at record highs. It’s not just that workers are hard to find; it’s that the rules of play have changed. Recent updates to labour schemes (like the PALM scheme) now require farmers to provide more consistent income guarantees for workers, regardless of the weather.
While these are important steps for fair work and the good of everyone working within Australia, it also means that the cost to harvest is now much higher and less flexible than it used to be. Australia now needs to adjust to seeing that in costs in real time. And for foodservice providers, this means that even when there is a ‘bumper crop’ (an unusually productive harvest), the savings don’t always reach the invoice because the cost of getting that produce out of the field and into a crate has fundamentally shifted.
How Buylink Services helps you move through the rise in costs
The reality is that food prices aren’t likely to drop to their lower levels any time soon. It’s a lot to take in, and we know how concerning it is for business owners and operators. But while we can’t control the weather or global fuel prices, we can change how we respond to them.
We recommend looking past your next invoice to plan for stability and move away from spot buying. While chasing the absolute lowest price of the day used to work, it’s a risky game in such a rocky market. The fact is that independent foodservice operators and hospitality groups without dedicated foodservice procurement expertise, are not really in the marketplace as the ACCC’s Supermarket Inquiry has demonstrated. Buylink Services are specialists in foodservice categories and end-to-end procurement services. We are your safety net as a market player in foodservice categories: we know if the price is accurate or indicative of market conditions. Additionally, at Buylink Services, we implement strategic pricing buffers that provide certainty in an uncertain market with:
- Monthly price holds. We hold pricing on fruit and vegetables on a monthly basis.
- Quarterly price holds. We secure meat pricing and broadline groceries for three months at a time. By “right-sizing” margins and holding prices, we mitigate the risk of escalating costs, allowing CFOs and Financial Controllers to forecast with confidence.
Are you feeling the pinch of rising supply costs?
Contact the Buylink Services team today to discuss how we can help you diversify your supply chain and protect your margins.
