Grocery Prices to Rise as Diesel Costs & Supply Issues Hit Farmers & Freight

Australian consumers are bracing for a jump in grocery prices as surging diesel costs and ongoing supply chain disruptions squeeze farmers and freight companies. The price hikes, already impacting fuel bills, are expected to translate to supermarket shelves within weeks, with dairy products likely to be among the first to see increases.

The escalating costs stem from the ongoing US-Israel war on Iran, which began last month and has sent diesel prices soaring across Australia. Demand in regional and rural areas has reportedly doubled, according to the prime minister, exacerbating existing logistical challenges. While the federal government has begun tapping into its emergency fuel supplies, the National Farmers’ Federation (NFF) warns it won’t be enough to fully mitigate the impact.

“We estimate in a matter of weeks we’ll start to see the costs flow through to the consumers on supermarket shelves,” NFF president Hamish McIntyre said. He anticipates that dairy will be the first sector to reflect the increased costs, followed by fruits, vegetables, and intensive animal industries.

The situation isn’t limited to production costs. The National Road Transport Association (NRTA) is sounding the alarm about a potentially “broken freight supply chain.” NRTA chief executive Warren Clark warned that many trucking businesses will struggle to pay their fuel bills when invoices arrive on April 21st, 2026, leading to significant disruptions. “You could see [food] prices increase dramatically,” Clark stated, adding that shortages could become commonplace. “It’s the only way that people can grasp how bad this situation is — when they go down to their supermarkets and shops, the stuff’s just not there to buy.”

The transport industry is calling for immediate government intervention, specifically a suspension of the road user charge to alleviate cash flow pressures on trucking companies. The Transport Workers’ Union, along with trucking employers and industry groups, are also urging amendments to the Fair Work Act to allow for emergency powers to address the surging fuel prices. TWU national secretary Michael Kaine emphasized the urgency, stating that businesses are at “imminent risk of collapse” and drivers are facing “deadly pressure” due to retailers refusing to absorb the increased fuel costs.

The concerns extend beyond immediate fuel costs. Rising fertilizer prices, coupled with the diesel increases, are creating a perfect storm for food producers. A recent report highlighted that global conflicts and fuel shocks are squeezing farmers, potentially leading to higher grocery prices throughout the year.

In response to the growing crisis, the federal government announced a national food supply chain assessment today, with a particular focus on diesel supply. The assessment, led by AgriFutures, will provide advice on strengthening preparedness for disruptions to food production and supply chains. An interim report is expected within a month, with a final report due by the end of 2026.

While the NFF has urged Australians to avoid panic-buying diesel, emphasizing the need to prioritize essential services and farmers, the situation remains precarious. The confluence of geopolitical instability, rising fuel costs, and supply chain vulnerabilities presents a significant challenge to Australia’s food security and affordability. Consumers should anticipate increased prices and potential shortages in the coming weeks, and the effectiveness of government interventions will be closely watched.