Source: The Conversation (Au and NZ) – By Marit E. Kragt, Professor of Agricultural Economics, The University of Western Australia
War in the Middle East has put a spotlight on the Strait of Hormuz, the narrow sea passage through which 20% of global oil supply is shipped. But far less attention has been paid to another essential product derived from oil and gas, on which the world also relies: fertiliser.
Roughly 20–30% of global fertiliser supply, such as urea, ammonia and phosphate, comes from the Middle East. The effective closure of the Strait of Hormuz has halted fertiliser exports from countries such as Saudi Arabia, the United Arab Emirates and Qatar.
For farmers in Australia, the disruption could not have come at a worse time. Most winter season grain crops are sown between April and June. While some farmers may have already secured their supply in preparation for the busy seeding season, others are still waiting for their fertiliser delivery.
How are fertilisers made?
Farmers apply fertilisers to provide their crops with essential nutrients, such as nitrogen, phosphorus and potassium. Without adequate fertiliser, crops such as wheat, barley and canola will produce lower yields with lower protein content.
Urea is one of the world’s most important nitrogen fertilisers. Urea is produced through a carbon-intensive process known as Haber-Bosch. First, ammonia is synthesised from atmospheric nitrogen and hydrogen (usually derived from fossil gas). This ammonia is converted into urea, a white and odourless pellet, which is easier to transport, store and apply on farms.With limited domestic production capacity, Australian farmers are almost completely reliant on imported urea. Australian agriculture imported 3.85 million tonnes of urea in 2024, most of it from the Middle East. With reduced global supply, the world price of urea has risen from A$675 per tonne in February, to more than $1,000 at the end of March, significantly increasing costs.
What does this mean for farmers?
Australia has limited domestic capacity to produce urea. Incitec Pivot Limited’s Gibson Island facility was Australia’s only manufacturer of urea until its closure in 2022.
A new facility planned by Strike Energy for Western Australia never broke ground, and the controversial Perdaman plant on the Burrup Peninsula won’t start producing urea until mid-2027. To make matters worse, Australia’s largest ammonia plant has been shut for two months after suffering a power outage.
Timing is everything in farming. Many Australian farmers are only weeks away from sowing. Even if fertiliser can be sourced from elsewhere in the world, it may not arrive in time.
Farmers may respond by planting fewer crops, leaving some land fallow, or turning to crops that require less fertiliser. If the Strait of Hormuz blockade persists well into 2026, we will face competing demand for fertiliser from farmers in the northern hemisphere. And Australia’s supply of “top-up” fertiliser (applied during the growing season to ensure crops reach their yield) will be affected. This could mean lower grain yields and reduced feed supply for livestock and poultry production.
Will our food cost more?
Food prices are influenced by more than fertiliser costs. Farmers are also grappling with increasing fuel costs. Soaring fuel prices affect all parts of the food supply chain, from processing and packaging, to transport, storage and retail. It is likely these collective impacts will increase food prices for customers.
Fertiliser and fuel costs constitute 25–30% of a cropping business’ total farm costs, so a sharp increase in both will significantly affect farm profitability.
Farmers only receive a small share of the price consumers pay for produce. At lower yields, farmers will face the squeeze of less production revenue and higher costs of production. While some producers may be able to weather the storm, others are facing a difficult year ahead.
– ref. Winter crops need to be sown – but Australia’s farmers are worried about fertilisers and fuel – https://theconversation.com/winter-crops-need-to-be-sown-but-australias-farmers-are-worried-about-fertilisers-and-fuel-279105
