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Tue, 31 Jul, 2018Danielle McCarthy

Why grocery prices are set to soar

Why grocery prices are set to soar

As Australia faces a horror drought, farmers across the country have been forced to slaughter their animals or watch them die as they struggle to feed and water livestock.

Currently, 98 per cent of NSW and almost two-thirds of Queensland is either in drought or drought affected, while parts of Victoria, South Australia and Western Australia have also been hit.

Some farmers have labelled this drought as the worst they’ve ever seen, and experts are warning the rest of the country to brace for the impact of the drought on supermarket prices.

Executive director of agriculture research firm Australian Farm Institute, Richard Heath, said while “every drought was different”, they drive up grocery bills at double the rate of inflation.

“Every drought is different depending on what time of the year it starts and where it’s more severe, and that flows on to what food types might be affected,” he told news.com.au.

“Drought is not a new feature of Australian agriculture and generally what’s happened in the past is there has been in increase in grocery prices overall … generally the price has increased at about twice the rate of the consumer price inflation during equivalent periods of drought in the past.

“But exactly what foods will be affected and the timing of that is really quite hard to determine until after the fact when we can go back and see how it’s translated into different foods.”

Mr Heath predicted the availability of meat will increase before the shortage kicks in and pushes up prices.

“In the early stages of drought the availability of meat products quite often increase with farmers offloading stock because they can’t feed them. So there might be a lot more on the market as the drought takes hold, but when the season recovers, farmers try to build up numbers again and potentially there could be less stock available for sale,” he explained.

“Grocery prices are obviously the way that the community overall feels the impact of drought when it gets severe enough to impact the availability of food, but before that farmers are obviously the first and most severely affected.

“The rural communities the farmers live in can also be severely affected because the income that farmers usually spend in the community just isn’t there. Retail and service industries in rural towns really suffer dramatically and they take a long time to recover, because the drought may break but it might be another six to 12 months before farmers start having decent incomes again.”

National Farmers’ Federation (NFF) CEO, Tony Mahar, revealed that essential crops such as wheat, barley, oats and canola have also been impacted by the drought, along with livestock.

“It’s pretty serious — some parts of Australia have been in drought for five, six, seven years so it has been really challenging for parts of the industry,” Mr Mahar told news.com.au.

“Animals are stressed, farmers are stressed and families are stressed so it does have a large impact.

“There has been a very reduced grain harvest this year. Australian farmers export around two-thirds of what they produce because it’s such a small market, so food security is not an issue.”

Mr Mahar explained that if the grain shortage drives up the price of livestock feed, the price of meat will also increase.

“Going forward next year, chances are feed prices are going to be more expensive for chicken, pork and beef producers who will have to pay more for their feed including barley, oats and wheat. Their input into their beef, pork and chicken products are going to get more expensive and ultimately, it could have a flow on to consumer prices,” he said.

Mr Mahar said that any government and community support during this drought would be welcomed, as Australian farmers only receive a fraction of government subsidies compared to farmers in Europe, Asia and the US.

“Farmers are a tough, resilient group and we’ll push through this … but at the end of the day, our farmers produce such amazing quality food and we need to support them through this time,” he said.

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