Why grocery prices are set to soar in 2022

Australians are being warned to brace for a surge in grocery prices moving into 2022 as a series of post-pandemic setbacks and shortages are threatening essential supply chains.

The Covid-19 health crisis has led to a dramatic rise in freight costs along with a severe container shortage, causing the cost of importing goods to soar.

Cafes have already warned that the price of coffee will go up by around $1 a cup in metropolitan areas due to the shortages.

But now another setback to the national supply chain looks set to hike up the price of even the most essential items.

Australia’s trucking industry is at risk of being ground to a halt as China has cut off our urea imports.

The anti-pollution additive, in the form of a diesel exhaust fluid called AdBlue, is required to make diesel vehicles run.

Without it, Australia’s trucks will be unable to carry essential grocery items to supermarkets across the country, resulting in a serious supply shortage.

While the federal government says there is enough urea to last through Christmas, if more cannot be sourced by early February, prices are likely to surge.

Australian Retailers Association chief executive Paul Zahra said the shortage in urea was another compounding blow to the nation’s grocers and supermarkets.

“Supply chains have been under enormous pressure throughout the pandemic and this potential shortage of AdBlue could certainly pose yet another challenge for Australian retailers and their suppliers,” Mr Zahra said.

“The ARA is working closely with the federal government’s taskforce which is looking at developing solutions to future supply constraints.”

Trade Minister Dan Tehan said on Monday that China’s ban on urea exports had shown that Australia needed to find new and more stable supply chains.

“What it clearly shows is that the pandemic has demonstrated that some supply chains are fragile,” he said.

“We’re working very closely with the sector here in Australia to make sure that we’re all seamlessly working to ensure that this supply of AdBlue will continue for the foreseeable future.”

Mr Tehan said he was approaching “key overseas markets” to establish new urea supply lines for Australia.

“There is some supply in Indonesia which we should be able to access over the coming weeks,” he said.

“There’s also been some representations that have been made to Saudi Arabia, to the UAE, to Qatar and also to Japan.”

Any potential increases to grocery prices are not expected to occur until 2022.