Fuel prices: Why a standard 2L bottle of milk could soon cost you $4 – almond, soy suffer too

Milk prices in Australia could hit $2 a litre if crude oil prices surge by 50 per cent – and even vegan, non-dairy alternatives would be pricier too.

Higher crude oil prices have already pushed average petrol prices above $2 a litre in every capital city for the first time ever and more expensive fuel increases transport costs, which get passed on to the consumer.  

A 50 per cent surge in crude oil prices, if entirely passed on, would see consumers pay $4 for a standard, two-litre bottle of cow’s milk, as record global demand for dairy products caused an increase in cheese and butter prices.

The West Texas Intermediate price of crude oil has this week dipped back below $US100 a barrel after extraordinary price hikes following Russia’s Ukraine war briefly pushed prices to a 14-year high of $US130 a barrel.

But Saxo Bank Australian market strategist Jessica Amir said sanctions on Russia could see prices climb to a record high of $US150 a barrel – and stay there.

Should wholesale milk prices hypothetically mirror the percentage increases in crude oil prices, Australian consumers would be paying $1.95 a litre for milk instead of $1.30 now as petrol and transport costs increased.

‘It’s probably not out of the question,’ she told Daily Mail Australia.

 

Milk prices in Australia could hit $2 a litre if crude oil prices surge by 50 per cent – and vegan alternatives will be pricier too. This would see consumers pay $4 for a standard, two-litre bottle of cow’s milk (pictured is a Coles supermarket in Sydney)

‘That will absolutely impact everything that consumers buy on a daily and weekly basis from milk to the cost of eggs to the cost of chicken.’

‘These companies are going to have to pass on these higher prices.’

The Australian farmgate price of milk, a major component of what consumers pay at the shop, was already on course for a double-digit increase before the Russian-led invasion of Ukraine. 

Rabobank dairy analyst Michael Harvey said higher prices for petrol, fertiliser and stock feed was more likely to cause a moderate increase in milk prices as farmers absorbed the costs rather than passing them on, in full, to consumers.

‘There’s no doubt when you get high energy markets and you get high oil prices, that does flow through into high food prices,’ he told Daily Mail Australia.

‘The cost of producing food can go up, the cost of distributing food can go up.

‘High oil prices is inflationary for the food complex.

‘There is potential that we’re going to see further price increases at the retail end, not just on milk.’

The Australian Bureau of Agricultural and Research Economics is forecasting a 10 per cent rise in the farmgate milk price in 2021-22 that would take the cost to 58 cents a litre.

The wholesale price was expected to rise to 59.5 cents in 2022-23, compared with 55 cents now.

Saxo Bank Australian market strategist Jessica Amir said sanctions on Russia could see prices climb to a record high of $US150 a barrel and stay there. Should wholesale milk prices mirror movements in crude oil prices, Australian consumers would be paying $1.95 a litre for milk instead of $1.30 now as transport costs increased

‘Constrained global milk production and strong demand for Australian dairy exports has led to strong export prices, and flowed through to higher farmgate milk prices offered by processors,’ ABARE said in its March quarter report.

‘The farmgate milk price could increase further if supply chain bottlenecks persist longer than expected and cause importing countries to compete for limited availability of dairy products.’

Mr Harvey said a global dairy shortage was likely to push up farmgate prices in south-eastern Australia. 

‘You’ve got global prices for dairy products at near or record levels, including butter and cheese,’ he said. 

Rabobank said a global shortage of dairy products would also push up prices in the first half of 2022.

‘Volatility loves uncertainty, and there is no shortage of uncertainty in global dairy markets,’ it said.

Non-dairy alternatives to milk could also get dearer with a drought in California causing an almond supply shortage, as soybean prices hit a decade-high (pictured is vegan activist Tash Peterson in Perth)

‘Even before the Russia-Ukraine conflict, global dairy commodity prices were soaring due to a supply shortfall.’

Fonterra Australia managing director René Dedoncker said the pandemic had also disrupted milk production, with staffing shortages at dairy producers sparking product buying limits at the supermarket.

‘We also continue to see the impacts of the global supply chain disruption on our business with no immediate end in sight, and more recently the domestic supply chain has been severely impacted by Covid,’ he said. 

Non-dairy alternatives to milk could also get dearer with a drought in California causing an almond supply shortage, which could in turn make almond milk more expensive. 

Soybeans are also pricier with the price of US$16.68 an ounce, the highest since August 2012.

Regular So Good soy milk is selling for $2.45 a litre, almost double the price of cow’s milk. 

So Good almond milk is $2.70 a litre but the equivalent unsweetened Vitasoy product is available for $2 a litre at Coles and Woolworths.

Ms Amir said vegans would not be spared as higher crude oil prices pushed up production costs as a global shortage kept prices high.

‘People are looking for alternatives as well,’ she said.

‘Because of the global commodity shortage, we are seeing soybeans hit higher highs – no matter where you go, if you look for an alternative milk to dairy and you go into soybeans, you can expect higher prices for soy milk, the same for almond milk as well.’

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