Australia grows the food. Who gets the money?

Australia grows enough food to feed roughly 70 million people, exports 71 per cent of what its farms produce and has just recorded the first $100 billion year in agricultural production. Yet it cannot officially say how every grocery dollar is divided between farmers, processors, supermarkets and everyone else in the food chain, according to new research that argues Australia’s greatest food challenge begins after produce leaves the farm.

The fourteenth report in The Balance Sheet research series audits Australia’s food economy from paddock to plate, examining farms, food manufacturers, supermarkets, households, export markets and the supply chains linking them.

Its central conclusion frames the paper.

Australia has built “a food economy that excels at producing and exporting food and struggles with almost everything that happens after it leaves the farm.”

The report finds Australian agriculture reached a record $101.4 billion in production during 2025-26, four years ahead of the industry’s own target, while agricultural exports climbed to almost $85 billion. The same official outlook, however, forecasts exports will fall 9 per cent next year and average broadacre farm profit will plunge 70 per cent as higher fuel and fertiliser costs, weaker prices and changing seasonal conditions bite.

“There is no average Australian farm,” the report concludes. “There are at least two farm economies.”

That contrast runs throughout the report.

Australia now exports food to 169 countries, yet the record export year is partly attributed to circumstances beyond its control. Beef exports reached an all-time high as the United States experienced its smallest cattle herd since 1951, creating exceptional demand for Australian producers.

“Records built on a competitor’s drought are revenue, not structure,” the report observes.

The report’s most original finding concerns the food dollar itself.

Australia has debated supermarket pricing for years, yet no official agency produces a food-dollar series showing how retail food spending is shared across the supply chain. The last comprehensive government study dates back more than two decades.

Using an indicative reconstruction based on Australian and international evidence, the report estimates farmers receive between $14 and $19 of every $100 spent on groceries, processors about $29, while supermarkets retain a gross margin of roughly $25 to $30 before wages, rents, energy and other costs reduce net profit to about $3.

The report argues the absence of an official food-dollar series is itself a policy finding.

Its supermarket chapter reaches a similarly balanced conclusion.

Coles and Woolworths account for 67 per cent of grocery sales, and the Australian Competition and Consumer Commission found Australia’s major supermarket chains among the world’s most profitable. It also found margins increased during the inflationary period.

However, the regulator did not conclude the companies engaged in price gouging, recommended no break-up of the sector and instead focused on stronger consumer protections, pricing transparency and supplier rules. Since then, the Food and Grocery Code of Conduct has become mandatory and Coles has been found by the Federal Court to have engaged in misleading discount advertising, while proceedings involving Woolworths remain unresolved.

The household chapter identifies another paradox.

Food now accounts for a smaller share of household spending than at any previous time, yet it has rarely felt more expensive. The report argues the explanation lies not in current inflation but in permanently higher prices. Food inflation has eased from its 9.2 per cent peak in late 2022 to 3.3 per cent, but prices remain about 25 per cent higher than they were in 2021.

For lower-income households the issue extends beyond perception. Foodbank estimates 3.5 million householdsexperienced food insecurity during 2025.

The report also argues Australia has become increasingly dependent on imported inputs despite its status as a food-exporting nation.

Australia imports about 62 per cent of the seafood it consumes, no longer produces urea after the closure of its last domestic plant in 2023, and depends on imported fertiliser, agricultural chemicals, machinery and fuel to sustain production.

“Food security is input security,” the report concludes.

One of the paper’s strongest chapters examines manufacturing, arguing Australia’s largest manufacturing industry is quietly losing ground. Food and grocery manufacturing employs almost 300,000 people, yet research spending has fallen below 2009-10 levels and the debate over whether Australia exports too many raw agricultural products without adding value remains unresolved.

Labour shortages remain another structural weakness.

Agriculture relies heavily on seasonal migrant workers, while the report notes the largest survey of migrant workers ever undertaken in Australia found two-thirds were paid below legal minimum rates. It also questions the language of labour shortages, arguing that “a shortage at a given wage is not a shortage, it is a price.”

Climate change, meanwhile, has already reduced average farm profits by 23 per cent, according to ABARES modelling cited in the report, while the productivity gains that have historically offset those losses are slowing. Agricultural productivity growth has fallen from about 2.2 per cent a year to 0.7 per cent, while research investment continues to decline.

The report argues the food economy’s greatest long-term risk is not production itself but the erosion of the systems that support it, including research, manufacturing capability, input security and labour.

Its final verdict distinguishes production from the wider food economy.

Australia has built a world-class agricultural production system, it concludes, but faces mounting challenges in affordability, value-adding, supply-chain resilience and the distribution of returns across the food chain.

“The paddock performs,” the report concludes. “It is everything between the paddock and the plate that carries the strain.”

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