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Higher food prices? Less choice? Poorer quality? Disgruntled fellow shoppers?
You ain’t seen nothing yet.
The muttering echoing through Australian supermarket aisles is just the beginning – even if US President Donald Trump miraculously pulls off his long-promised “deal” to end his Iran War.
Critical links in the global supply chain are broken.
And they’re steadily winding their way towards the next harvest.
The doubling (and in some places tripling) of diesel costs makes farming far more expensive. Not to mention transporting produce to market.
And a lack of fertiliser means the next crop will produce less. Or not be planted at all.
Now, last season’s harvest is feeling the strain.
“So today, we have enough food available, and we have enough stocks. The problem is for the next harvest,” warns UN Food and Agriculture Organisation chief economist Maximo Torero.
It’s a global problem.
It extends from the fields of Africa to the prairies of the United States.
“If the situation improves tomorrow, if you open the Strait of Hormuz tomorrow, we will still have higher prices because of less supply,” Torero explains.
“Farmers [have] already made a decision. But we could avoid a significant crisis by the end of the year or 2027.”
And if we don’t open the Strait of Hormuz tomorrow?
“That means that the yields in the world will be affected for the second half of the year for 2027,” Torero said.
Crisis in slow-motion
A new report published by the Food and Agriculture Organisation of the United Nations (FAO) states that the real Hormuz crisis will arrive in about six months.
“The decisions we make now will determine whether this remains a manageable shock, or evolves into a deeper global food security crisis in 2026 and 2027, and beyond,” Director General QU Dongyu told a crisis meeting in Spain on Wednesday.
He said the US/Israel attack on Iran had produced a moment of “profound geopolitical and economic fragility”.
“What we are witnessing today is not only a geopolitical crisis, it is a systemic shock to the global agrifood system,” he said.
Crude oil. Refined fuels. Natural gas. Sulphur. Plastic components. Helium. Fertiliser ingredients.
These are no longer flowing into a global network optimised for “just in time” corporate productivity and efficiency demands.
Resilience, however, requires redundancy. And that comes at a cost.
“Input import-dependent countries, in particular, are facing rising bills, while vulnerable households are losing purchasing power as inflation erodes incomes,” the FAO warns.
That includes Australia. And the United States.
Profits versus pragmatism
The lessons of Covid-19 and the 2021 China trade war-induced AdBlue diesel additive crisis are yet to be learned.
Global fertiliser companies have had to slash distribution due to a shortfall in sulphur stocks. It’s a central ingredient in many farming products. And there was no slack in the system.
Richer nations, including Australia and those of the European Union, are now rushing to find alternative sources and build up stockpiles.
“You see Australia going to a country in Africa to try to find these inputs. You see other countries going to Uzbekistan. So I think markets are being searched, and countries have learned a little bit,” the WFO’s Torero told US broadcaster NPR.
“We have been through Covid-19. We have been through the war in Ukraine. So countries are trying to move fast. But again, the benefit – the result is marginal, no?”
Reaction, however, isn’t resilience.
It’s an expensive strategy in a supply-versus-demand-driven market. It also means many nations in Asia and Africa are being left with little or nothing for their own fields.
While the United States is producing – and exporting – more crude oil as a result of its Iran war, it has not escaped rising prices. And its farmers are also struggling to secure fertiliser.
The solution?
The Trump administration is quietly attempting to do a deal with the dictatorship of Belarus, a major partner of Russia in its invasion of Ukraine.
US officials have asked Lithuania, Poland and Ukraine to lift sanctions.
They have become a supply chokepoint.
“Now that the United States has lifted US sanctions on Belaruskali, US firms are interested in acquiring and transporting Belarusian potash,” a written proposal states.
“Doing so would require transit through EU countries bordering Belarus or through Ukraine to avoid transport through Russia.”
AdBlue all over again
It was only five years ago. But an old supply chain crisis is threatening to rear its ugly head. Again.
AdBlue is an additive to diesel fuel that reduces polluting emissions. Modern engines make its availability a necessity. And it’s made from an ingredient also critical for fertiliser: Urea.
Australia consumes about 3 million litres of the product (also known as Diesel Exhaust Fluid) each week.
China is the world’s largest manufacturer of urea. And it clamped down on exports in 2021 to alleviate a crisis in its own fertiliser industry.
Canberra produced a knee-jerk reaction.
It bought up stockpiles, handed cash to Australian manufacturers, and shifted supply chains from China towards … the Middle East.
The crisis went away. So too did the political motivation to address it.
Australia reportedly has about 12 weeks’ worth of stock in the system. Under optimal market conditions.
The market is no longer optimal. Again.
“The Covid-19 pandemic and the AdBlue crisis showed how supply chains of individual products can quickly become strategic vulnerabilities on a national scale,” writes Australian Strategic Policy Institute (ASPI) analyst Daniel Mikasha.
“Australia needs a broader resilience strategy that encompasses the full network of imports, domestic production and infrastructure in every industry.”
AdBlue didn’t get one.
Talk of restoring local urea production has evaporated into hot air. And Canberra remains dependent on major international suppliers fulfilling their contracts.
Some 95 per cent of urea must be imported. About 70 per cent of that comes from the Gulf States.
Prices have doubled. Stockpiles are shrinking. Again.
“The lesson for operators is straightforward: waiting for government co-ordinated responses to restore supply is not a business continuity strategy,” an assessment by diesel systems supplier A.FLO Equipment concludes.
“Having your own secure, adequate storage is.”
Jamie Seidel is a freelance writer
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