Singapore’s food production sector is facing a mounting financial squeeze as the Middle East energy crisis hits Singapore food manufacturers, driving up the cost of everything from the diesel that powers industrial boilers to the plastic resins used for packaging. While many producers have spent months absorbing these spikes to shield consumers, industry leaders warn that the buffer is running thin.
The crisis is manifesting as a “total shock” to the supply chain. Unlike the disruptions seen during the Covid-19 pandemic, current volatility is hitting multiple operational fronts simultaneously: raw ingredient procurement, packaging materials, freight insurance, and last-mile distribution. For many, the cumulative effect is proving more damaging than previous global shocks.
Thomas Pek, managing director of Tai Hua Food Industries, describes a scenario where costs are rising across every line item. For his soya sauce business, the impact is visible in the very bottles the product is sold in. The price of polyethylene terephthalate (PET) resin—a crude oil derivative essential for plastic bottles—has surged, while the diesel required to steam soya beans and cook the sauce has seen a dramatic climb.
According to Pek, the cost of industry diesel purchased directly from Singapore refineries jumped from roughly $1.20 a litre in late February to $3 a litre by April 10. Despite these pressures, Tai Hua has not yet raised retail prices, though Pek noted that a price increase of 10 per cent to 15 per cent may become necessary starting in May if the energy infrastructure damage in the Middle East remains unresolved.
Mr Pek checking the condition of the soya bean paste in his factory’s natural fermentation drying yard.
PHOTO: COURTESY OF TAI HUA FOOD INDUSTRIES
The Ripple Effect: From Natural Gas to Nitrogen
The crisis extends beyond oil and diesel, deeply impacting the agricultural inputs necessary for crop production. Nitrogen-based fertilisers, which are highly natural gas-intensive, have seen production costs skyrocket. Because the Middle East accounts for approximately 30 per cent of the global fertiliser trade, disruptions in the region have pushed the global price of urea up by more than 35 per cent over the last month.
This volatility is compounded by trade restrictions from Russia and China, which have tightened the global supply of nitrogen fertilisers. According to ANZ Research, these shortages may force farmers to reduce the amount of fertiliser used or plant smaller areas, which could lead to lower harvests and heightened food inflation.
To mitigate these risks, Singapore-based Agrocorp International has shifted its procurement focus toward alternative sources in Pakistan, South Korea, Morocco, and Vietnam. Chief Executive Vishal Vijay noted that while freight costs are rising, the impact on final retail prices may be marginal since the cost of imported agri-commodities is only a fraction of the final price. He also suggested a potential shift in crop patterns: because wheat and rice are more fertiliser-intensive than soya beans or pulses, farmers might plant more of the latter, which could help moderate some price increases.
Local Farms and the Struggle to Absorb Costs
Across Singapore, local producers of eggs, vegetables, and fish are reporting similar strains. While some have managed to maintain prices through stockpiling or absorbing losses, the sustainability of this approach is being questioned.
- Poultry: Chew’s Agriculture reports that while feed supply remains stable, the cost of raw ingredients sourced globally has risen significantly. General Manager Chew Zi Xuan stated that the steep increase in diesel has increased distribution costs “tremendously.”
- Aquaculture: Singapore Aquaculture Technologies, operating in the Johor Strait, expects feed prices to rise by 10 per cent in the coming weeks. CEO Dirk Eichelberger noted that diesel prices have more than doubled, limiting the company’s ability to raise prices due to market competition.
- Vegetables: Meod, a local vegetable farm, utilized a stockpile of fertiliser acquired prior to the conflict in Iran to create a temporary buffer, but continues to struggle with rising delivery and distribution costs.
Operational Pivot and Government Support
In response to the volatility, manufacturers are exploring logistical efficiencies to save on fuel. Raymond Tan, president of the Singapore Food Manufacturers’ Association (SFMA) and managing director of Tan Seng Kee Foods, said companies are considering consolidating deliveries and scheduling production for specific days to optimize fuel apply.
The Singapore government is also expanding financial support to help firms modernize. Senior Minister of State for Finance Jeffrey Siow announced in Parliament on April 7 that the base tier of the Energy Efficiency Grant—which provides up to $30,000 in funding for fuel-efficient equipment like cold rooms and cookers—will be expanded to cover all sectors. The scheme’s deadline has also been extended to March 31, 2028.
| Input Type | Primary Driver | Observed Impact |
|---|---|---|
| Packaging (PET) | Crude Oil Disruptions | Bottle/cap costs rose 8% in March, 15% in April |
| Industrial Diesel | Middle East Supply Shock | Price rose from $1.20 to $3.00/litre (Feb-Apr) |
| Nitrogen Fertiliser | Natural Gas / Trade Bans | Global urea prices increased >35% in one month |
| Logistics | Diesel & Insurance | Increased freight and shipping insurance costs |
Looking Ahead: The Breaking Point
The prevailing sentiment among manufacturers is that the full impact of the crisis has yet to be felt. Many companies are currently utilizing “old” stocks of ingredients and packaging materials secured before the onset of the war. As these inventories are depleted and replaced by novel orders at current market rates, a second wave of price hikes is expected.
For now, the industry is leaning on renewable energy transitions. Chew’s Agriculture has installed rooftop solar panels, and Singapore Aquaculture Technologies is investing in floating solar energy to reduce diesel dependency by July. However, these measures only address energy costs; they do not solve the rising price of plant-based feeds driven by global fertiliser shortages.
The next critical checkpoint for the industry will be the transition into the second quarter of the year, as manufacturers determine if the Energy Efficiency Grant and internal cost-cutting measures are sufficient to avoid passing price increases on to the consumer.
We invite our readers to share their perspectives on how rising food costs are affecting their households or businesses in the comments below.
