The closure of the Strait of Hormuz has sent oil, diesel, and fertiliser costs surging — and Australian farmers are absorbing the hit at the worst possible time. Woolworths has moved to cushion some of that pressure, but the structural challenge for the supply chain runs deeper than a single per-litre milk payment.
Woolworths has increased its payments for Farmers’ Own milk by 10 cents per litre, citing cost pressures flowing from the Middle East conflict. The supermarket says it is absorbing additional supply chain costs internally, with no price increase passed to customers at the checkout. The move follows Coles announcing a $1 million one-off relief package for its own farming suppliers earlier this week.
What the Strait of Hormuz Closure Means for Australian FMCG
The Strait of Hormuz is one of the world’s most critical shipping chokepoints, carrying a significant share of global oil and gas exports. Its closure has driven up the cost of fuel and petrochemical-derived inputs — including fertilisers — at a pace that has caught many agricultural supply chains off guard.
For Australian farmers, the timing is particularly difficult. Fuel is a core operating cost across planting, harvesting, and transport. Fertiliser prices, already elevated in recent years, have climbed further. Woolworths sources around 20 per cent of Australia’s fresh produce and approximately 7 per cent of its beef, placing it at the centre of that supply chain exposure.
When a major retailer absorbs cost increases rather than passing them through, it signals something about the state of supplier relationships — and about how much margin pressure the retailer is willing to carry internally.
Woolworths Farmer Payments: What Has Been Confirmed
Woolworths confirmed it has increased payments for Farmers’ Own milk by 10 cents per litre. The company stated this additional payment has not been passed on to customers, meaning the cost is being absorbed within Woolworths’ own margin structure.
“We know Aussie households are feeling real pressure when it comes to rising costs and fuel prices. We’re committed to doing what we can to buffer customers at the checkout and absorbing some of those extra costs in our supply chains,” a Woolworths spokesperson said.
The supermarket also acknowledged that suppliers, farmers, and transport partners are “navigating difficult cost increases like the rise in fuel prices,” and said it is working to find the right path through. No further detail on the scope of that work was provided publicly.
How Woolworths and Coles Are Responding to Farmer Cost Pressure
Both major supermarkets have now announced support measures for farming suppliers, though the structure of each response differs. Coles moved first with a one-off cash relief package. Woolworths has opted for an ongoing per-litre payment increase in the dairy category. I think the distinction matters more than it might first appear.
| Retailer | Measure | Value | Structure | Passed to Customers? |
|---|---|---|---|---|
| Woolworths | Farmers’ Own milk payment increase | 10 cents per litre | Ongoing payment uplift | No — confirmed |
| Coles | One-off farmer relief package | Up to $1 million | One-off payment | Not confirmed |
An ongoing per-litre uplift provides more predictable income support for dairy farmers, while a one-off payment addresses immediate cash flow without changing the underlying cost structure. For suppliers planning forward, that difference is commercially significant.
What These Measures Do Not Change for the Broader Supply Chain
A 10-cent per litre increase in milk payments, while meaningful for dairy farmers in the Farmers’ Own programme, does not address the full breadth of cost pressures hitting Australian agriculture. Fuel, fertiliser, and transport costs affect every category — not just dairy.
Woolworths has not confirmed any equivalent support measures for its fresh produce or beef suppliers, despite sourcing significant volumes from both. The scope of Coles’ $1 million package and which suppliers qualify has also not been fully detailed publicly.
For suppliers outside these specific programmes, the cost environment remains unchanged.
Dairy farmers supplying Woolworths under the Farmers’ Own label are the clearest near-term beneficiaries, with the per-litre uplift providing ongoing rather than one-off relief. Transport and logistics operators in the fresh produce supply chain remain exposed to fuel cost volatility without confirmed support from either retailer.
Supermarket Supplier Support and the Pressure Building Across Australian Grocery
Both Woolworths and Coles moving to support farming suppliers in the same week reflects the scale of the cost shock flowing through the agricultural supply chain. It also reflects the political and reputational context both retailers are operating in — with the Australian Competition and Consumer Commission (ACCC) actively pursuing legal action against Woolworths in the Federal Court over pricing conduct.
Absorbing supply chain costs and increasing farmer payments is commercially costly for a retailer already under regulatory scrutiny. Whether these measures represent a genuine shift in how the major supermarkets manage supplier relationships, or a short-term response to an acute crisis, will become clearer as the Hormuz situation develops and cost pressures either ease or persist through the year.
If you’re a supplier, brand manager, or logistics operator working within either retailer’s network, now is the time to document your cost exposure and open a formal conversation — because the window for proactive negotiation tends to close faster than the crisis that created it.
If fuel and fertiliser costs remain elevated, a 10-cent milk payment and a one-off relief package will look like the opening move in a much longer renegotiation of how Australian supermarkets share supply chain risk with the farmers who feed their shelves.