Record-strength El Niño could push up Australian grocery bills
Experts warn the strongest El Niño on record could drive food prices higher in Australia over the next year, adding pressure to households and complicating the central bank's inflation fight.
Australia's Bureau of Meteorology forecasts El Niño will peak in late spring or summer, reaching levels above any seen since reliable records began in 1950. Analysts warn the hot, dry conditions expected in key eastern Australian growing regions could significantly affect food pricing over the coming year.
Michael Harvey, a consumer food analyst at Rabobank, described the situation as highly volatile, with real risk that rising costs across the food system could feed through to consumer inflation. The Food and Agricultural Organisation has already flagged growing weather-related risks reflected in climbing global commodity prices.
Not every commodity is moving in the same direction — dairy and meat prices have begun easing after a recent surge, driven by separate market dynamics. In Australia, El Niño poses a risk to the winter wheat crop, though a strong harvest is still expected; the true impact should become clear in the final quarter of the year.
Global pressures
Even setting weather aside, global shocks have already pushed commodity benchmarks higher this year, feeding through to local markets via exports. CBA agricultural economist Dennis Voznesenski said global wheat prices have risen roughly a third since early July, compared with about 9% in Australia. Meanwhile Brent crude oil topped US$97 a barrel, up 35% since early July, and diesel and fertiliser prices remain elevated due to ongoing supply disruptions.
Record grain harvests in Russia and Ukraine are struggling to reach international markets after tit-for-tat attacks on Black Sea ports — Voznesenski noted that roughly a third of global grain exports are currently stuck.
Over the past five years, Australian supermarket prices have risen sharply, deepening the cost-of-living crisis: staples such as bread, cereals and dairy jumped 28-30%, compared with just 3-6% in the preceding five-year period. Still, Challenger chief economist Jonathan Kearns cautioned that the link between El Niño and food prices isn't clear-cut, since factors like labour, freight and packaging costs often play a bigger role at the checkout.
