Trucking companies are passing on rising fuel costs faster than some companies can adapt, with one farmer saying further ‘terrifying’ price hikes are ahead.

The fuel surcharges of some transport companies are now 30% following a sharp increase in the price of oil in March after the invasion of Ukraine by Russia. the fuel adjustment factor (FAF) is added to the customers’ freight rate and is revised weekly, fortnightly or monthly.

Mid-Canterbury wheat farmer David Clark said transport companies immediately passed on the higher fuel prices, but he could not.

Clark, president of Federated Farmers for the region, said his own fuel costs were skyrocketing, but he would not benefit from the temporary reduction in road user charges on the diesel used by his farm equipment.

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His combine was burning 1,500 liters of diesel a day during the recent wheat harvest, and another 600-700 liters a day was going through other machines.

“This last harvest we had, our fuel costs were more than double what they were the previous harvest.

David Clark says transport companies immediately pass on higher fuel prices, but he can't.

Provided

David Clark says transport companies immediately pass on higher fuel prices, but he can’t.

“We just have to pay it, the combine has to work, that’s how the wheat is harvested. There is no alternative.

Transport companies could immediately pass on their higher fuel costs through the fuel adjustment factor, he said.

“It’s their fuel transfer mechanism, and it’s done very abruptly and very immediately. I wish I could do that for the food I sell at the flour mill, but I can’t. I have to pay it, but I can’t pass it on.

He saw no end in sight to rising prices at all levels.

“The price hikes we see coming that haven’t happened yet are terrifying. We have seen our fertilizer costs increase by 200-300% in one year, and some of the indications are that further increases of 50-100% are imminent. »

Prices were already rising at the supermarket, but Foodstuffs, owner of Pak ‘n Save and New World, said it had not directly passed on the increases seen in fuel and transport costs.

Foodstuffs spokeswoman Emma Wooster said she was trying to absorb as much as she could, “but as an industry and a nation we all have to share the burden of price increases due to a wider inflation and that will sometimes mean higher prices at the supermarket”.

Graeme Doull, Countdown’s national transport manager, said Countdown’s contracts with transport companies included quarterly fuel reviews, which typically amounted to 10-20% of the total transport cost.

“We are currently working with our transport partners to move to a monthly review cycle to ensure things are fair for both parties.”

Mainfreight chief executive Don Braid said the FAF is reviewed weekly and adjusted by 0.8% when the price at the pump changes 5 cents per litre, either up or down. The company reduced the surcharge as quickly as it imposed it, he said.

He agreed that it might be difficult for customers to plan ahead if their bill increased every week, but that depended on how they ran their own business and what they were transported.

“We have these honest and open conversations with our customers, and explain it to them in detail, and they’re well aware of that, and it’s been there for a long time, so customers see it as part of the transportation business.”

Mainfreight would reduce its fuel surcharge in line with the temporary reduction in road charges.

The fuel adjustment factor is added to the customers' freight rate and is revised weekly, fortnightly or monthly.

The fuel adjustment factor is added to the customers’ freight rate and is revised weekly, fortnightly or monthly.

Rising fuel prices were the canary in the coal mine for households, said ASB senior economist Mark Smith. “Fuel is pretty much used up throughout the economy and the thing that people regularly notice pretty quickly.”

When the price of everything seemed to be going up, it was easier for companies to pass on the costs that ended up falling on buyers.

“The consumer is basically at the end of the chain and right now the resistance is not very high, so a lot of those costs are going to be passed on to them,” Smith said.

There was a lot of pain in store for households this year due to inflation, he said. “We’re probably more at the beginning than the end.”

Don Wilson, managing director of livestock transport company OnRoad Transport, said his company had only just introduced a fuel adjustment factor due to the huge increase in diesel prices last month.

“We were increasing the [cartage] the fares slightly but to cover fuel as it has increased since Christmas we cannot continuously increase those fares so we have decided it is best that we have a base fare and have an adjustment fuel each month.

At the end of December, its fuel price was around $1.39 per liter, and it had climbed to $2.16 per liter by March 11.

“March was a huge month for fuel increases so we had to introduce it, we had no choice.”