The cost of fish and chips is tipped to rise because the price of a prominent cooking oil used to fry the family favourite has skyrocketed.
- The price of canola oil has skyrocketed amid high demand
- Canola oil is one cooking oil which has recorded significant price increases
- Industry players say the rising cost of production could drive some outlets out of business
Strong international demand for canola oil and tight global production has seen Australian canola prices reach historic highs this season.
While Australian farmers are enjoying the golden opportunity, the food service industry says the rising cost of the key ingredient is making it tough for some fast-food outlets to make a profit.
‘We’re just getting by’
Michael Cristaldi runs a small fish and chip shop at Donnybrook in Western Australia’s south-west.
He said his canola oil bill had gone up 70 per cent in just a few months — a cost he has had to wear so far in an already challenging market environment.
“It’s not easy; we’re just getting by,” he said.
But it is not just the cost of frying oil that is impacting Mr Cristaldi, the frozen chips he buys to serve to his customers are also becoming more expensive.
Margins already thin
Bendotti Exporters owns WA Chips which is the state’s only commercial chip manufacturer.
The business uses about 300,000 litres of canola oil to process about 13,000 tonnes of potatoes into chips annually.
Non-executive chairman Brian Piesse said canola oil was a major component of the oil blend used in the chip-making process because of its quality.
“People who have studied the types of oil we should be using believe high-grade canola oil produces the best product at the end of the day,” he said.
Mr Piesse said with margins already thin amid high labour, energy transport costs, the business would have to pass on the increased cost of oil in the wholesale chip price.
“It’s adding significant cost to the process, and how does the manufacturer and the retailer recover that cost? The only way to do that is to pass some, or all of that, on to the customer,” he said.
A golden time for farmers
Thomas Elder Markets analyst Andrew Whitelaw said the canola price had been driven up by drought conditions and logistics challenges in Canada, which is traditionally the world’s largest producer.
“Canada supplies about 60 per cent of the global trade in canola seed which gets produced into canola oil [but] they’re no longer really in the market,” he said.
“In recent times their main port has closed down because of storms.
“So really we’ve had a situation where the world has gotten pretty short on canola and Australia is going to be the biggest exporter this year.”
Mr Whitelaw said while the situation had benefited Australian farmers who were enjoying record canola prices and production, it was having a significant impact further along the supply chain.
“Across the country the majority of grain growing zones are at over $900 per tonne, they have hit over $1000 per tonne in recent months, especially in the West,” he said.
“Our customers down the line also have to pay the cost.
“Whether that’s the crush plant that’s buying that canola, or whether it’s the mum and dad fish and chip in Scarborough or Bunbury where they have to buy oil at an inflated price.”
Not just canola oil
Mr Whitelaw said canola oil operated as a subset of various other oils, including palm and soybean, which had also increased in price.
He said demand for these oils had increased across the board.
Mr Whitelaw said the price of beef tallow, another favoured cooking fat had also increased, adding to profit pressures for the food service industry.
Fears for family businesses
Michael Xydas owns a wholesale fish and chip distribution business at Wangara in Perth’s north.
He supplies more than 300 clients in the metropolitan area and said the price pressures could be devastating.
“They [fish and chip shop owners] are small, family businesses and when they have to pay so much for oil there’s not much profit left,” he said.
“I think the future is very uncertain.”