Finance Consumer Consumers told to expect higher food prices as bushfires continue to rage

Consumers told to expect higher food prices as bushfires continue to rage

The bushfire crisis will lead to higher food prices. Photo: TND
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Consumers face the prospect of higher grocery bills over the coming months as the economic cost of the bushfire crisis continues to escalate.

The unprecedented fires have torched more than eight million hectares so far – destroying fences, razing pastures, and burning through feed.

More than 100,000 cattle are thought to have died, while power outages have left dairy farmers dependent on generators.

Such devastation will significantly reduce the amount of food farmers in fire-affected regions can produce over the coming months – meaning prices are likely to rise.

And tree-blocked roads are delaying the recovery.

The fires have torched more than eight million hectares of land. Photo: AAP

Greg Wilson, 59, is a beef producer from Milton, NSW.

Bushfires on New Year’s Eve and January 4 claimed 85 per cent of Mr Wilson’s pasture, two kilometres of his external fencing, and roughly 20 tonnes of hay.

Mr Wilson managed to save his home and 60 head of cattle.

But he now has very little to feed them.

“There won’t be much income from this farm for the next year, that’s for sure – and we’re not out of the woods yet,” Mr Wilson told The New Daily.

“Until we get some substantial rain, we’re going to be on high alert.”

Mr Wilson said he was fortunate to earn a portion of his income from off-farm activities.

“But for those who are 100 per cent dependent on farm income – the bushfires are really going to knock them for six,” he said.

“It’s about re-stocking and building back up your breeding herd – and that’s a three-year program to get back to full capacity.”

Mr Wilson lost 85 per cent of his pastures and roughly two kilometres of fencing. Photo: Greg Wilson

IBISWorld senior industry analyst Tom Youl said the bushfires would undoubtedly lead to some higher prices.

But he told The New Daily the full extent of the impact won’t be known for months.

“We’re likely to see some modest price rises across the board, in terms of both meat and fruit and vegetables,” Mr Youl said.

“We’ve already seen some prices for things like avocados and tomatoes, even lettuce, go up by as much as 20 per cent. But that’s as much as to do with supply constraints, with so many roads being closed down due to the fires and trees falling over roads.”

It’s too early to tell which crops have been worst affected by the crisis, Mr Youl said.

But Michael Burt from NSW Farmers told The New Daily apple orchards, beehives and oyster farms had been particularly hard hit.

And Mr Youl said bushfires normally affected the supply of vegetables more than the supply of meat.

“The number of cattle lost in the bushfires could easily rise above [the 100,000 figure], as losses continue from heat and smoke stress. But one potential factor that could offset that is an increase in livestock sent to slaughter due to pasture damage,” Mr Youl said.

“As we’ve seen in drought, as pasture quality deteriorates, a lot of farmers have been forced to send an increased proportion of their cattle heard off to slaughter – and that tends to result in prices going down.

“So you have it on two sides of the coin with meat. Whereas with vegetables it’s a bit more cut and dry, in that decreased supply will lead to higher prices.”

Mr Yuol said average fruit and vegetable prices could rise by up to 12 per cent over the year, which is the amount by which prices increased in the wake of 2017’s Cyclone Debbie.

Any price hikes would be coming off a high base, too, with grocery bills already elevated because of the ongoing drought.

That said, milk prices probably won’t go up by much.

The bushfires have affected three dairy-producing regions and will impact milk supply.

But supermarkets operate a fixed-pricing system and have so far resisted calls to lift milk prices to meet the fall in supply.

Rabobank senior analyst Michael Harvey said the bushfire supply shock comes at a time “when milk prices are already under pressure because of the lingering impacts of drought”.

And he told The New Daily farmers would be doing it tough for a long time after the immediate threat passes.

“Even when the bushfire threat passes, you still have to make sure that you [have power to] milk the cows, and that someone can get in there and collect the milk – otherwise the milk is getting tipped down the drain,” Mr Harvey said.

“And that’s clearly been happening, because there’s been road closures and loss of power and so forth.”

The warnings of rising food prices come after the economic cost of the bushfire crisis topped $2 billion.

According to estimates by SGS Economics and Planning head of economic analysis Terry Rawnsley, communities affected by this season’s bushfires have already lost between $1.1 billion and $1.9 billion in lost tourism, retail and agricultural income.

Smoke haze in Australia’s major cities had cut a further $500 million from GDP, he said, thanks to ill health and declining productivity and spending.

And rapidly growing insurance claims – which so far number more than 8200 – suggest the overall cost to the economy will continue to rise.

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