An expert has warned that a “demand destruction” for fertiliser will force Australian farmers to take drastic measures that could cause chaos in the country’s food supply chain.
A bleak report by Rabobank this week outlined concerns of a prolonged period of tight supply in the international fertiliser market due to the ongoing Middle East war.
The agribusiness banking specialist said the closure of the Strait of Hormuz had impacted global trade, leading to “substantial” volumes of fertiliser being removed from circulation.
The prices of nitrogen and phosphates have increased “far faster than agricultural commodity prices” as a result, and farmers around the world, including in Australia, cannot afford them.
Bruno Fonseca, a senior analyst at Rabobank, said affordability and supply issues meant farmers will be forced to cut down on fertiliser use, delay purchases or plant different crops.
“The outlook for 2026 points to continued pressure on farm economics and increased downside risks for global crop production and food price stability,” he said in the report.
“In such a scenario, farmers may switch to planting crops that require less nitrogen or choose to lower application rates and/or planted areas, impacting demand for a longer period.”
Australian farmers, who have been struggling with tight cost margins since at least the Covid pandemic, will likely have to implement some of these measures to stay afloat.
RaboResearch Australia-based commodities analyst Paul Joules said farmers may favour crops such as barley and canola, which have previously shown “greater margin resilience”.
Other farmers have suggested popular vegetables like broccoli and cauliflower won’t be grown in coming months, citing fertiliser and fuel costs.
A change to production could lead to diminished crop yields, rising food costs, and possible shortages that would cause serious disruptions to the country’s food supply chain.
Marit Kragt, professor of agricultural economics at the University of Western Australia, said there is enough fertiliser supply in the country to last until at least May, but the federal government has to think ahead to the cooler months between July and August.
“If those purchases are not filled, that’s when the crunch happens,” she told SBS.
Heatwave, El Nino threat
Another problem that could exacerbate the global food supply chain is heatwaves.
As Australia heads towards winter, the northern hemisphere begins to warm up, with the South East Asian region forecast to have a warmer-than-usual early summer.
For example, the temperature reached at least 37C for three consecutive days in Malaysia late last month.
Singapore has experienced direr than usual weather, leading to higher temperatures, according to the nation’s meteorological service.
While Thailand and Vietnam, around the same period, recorded highs of 40C and 38C, respectively, with Indonesia also expected to see above-normal temperatures.
MetMalaysia’s director-general Mohd Hisham Mohd Anip warned that the heatwave is expected to persist until at least June.
Australia, particularly the northern parts, can be impacted by South East Asia’s heat as the regions are interconnected by atmospheric and ocean patterns.
Heat can severely impact the agriculture sector. This was seen in January when mango, banana and avocado growers lost tonnes of crops in scorching temperatures near 50C heat.
Elsewhere, wheat and grape yields have also declined in part because of more heatwaves.
Farmers say millions of dollars worth of crops and income were lost, with some suggesting it would take a year to understand the full extent of the damage.
While the threat of a “super” El Nino could bring drought, extreme heat and bushfire risks to Australia later this year, another problem farmers may have to deal with.
El Nino refers to a natural climate cycle when ocean temperatures along the equator in the Pacific rise well above average, shifting weather patterns globally.
Australia often feels the impact more than most countries, with previous El Nino events coinciding with some of the worst droughts.
After three years dominated by La Nina – the system that typically brings wetter conditions – the Pacific is now in a cooling phase, opening the door for a swing back to El Nino during the key transition period between mid to late June.
The Bureau of Meteorology has warned that its and other modelling suggests the tropical Pacific will continue warming to reach levels consistent with El Nino.
“The models vary in the timing at which El Nino thresholds may be reached. Some suggest as early as May, while others show a slower warming with thresholds not being met until July,” the BoM said in a report released last week.
“Historically, El Nino has generally had a drying influence over areas of central and eastern Australia, but El Nino–Southern Oscillation (ENSO) is only one part of a complex system that impacts global weather and climate and all events are different.
“The long-term drying trend over southern Australia in recent decades is also likely to be a contributing factor.
“While models show an increased chance of El Nino forming later this year, any impact on Australia’s winter–spring rainfall will depend on many factors.”
Slow recovery
Rabobank forecasts a “limited recovery” for fertiliser but only in the second half of 2026.
Australia relies heavily on fertiliser imports, but the closure of the critical shipping route means supply levels of urea, for example, have fallen to critical levels.
The conflict has seen granular urea prices surge by 94 per cent year to date, another added cost farmers do not need.
The Albanese government on Wednesday announced it has commenced “work” with leading fertiliser companies, such as Incitec Pivot and CSBP, to secure more supply by underwriting the purchase of fertiliser on the international market.
“This package involves price risk support to protect importers from extreme price volatility and ensure additional fertiliser arrives in Australia for the current and upcoming growing seasons,” it said in a statement.
Minister for Agriculture, Fisheries and Forestry Julie Collins said the government will continue to work with farmers to help manage the impacts of the war.
“We understand how critical fertiliser is for Australian farmers, for our food production system and the food security of our region – that’s why I have been working with industry to support getting fertiliser to Australian farmers,” she said.
“This is a significant outcome for our farmers and will support industry to secure and deliver the fertiliser we need sooner.”
Earlier this month, Ms Collins said Australian officials were speaking to a “range of countries in relation to fertiliser”, singling out Indonesia and Malaysia.
“There’s been some discussions with Indonesia. There’s been some discussions with Malaysia. But more broadly, across Southeast Asia,” she said.
Days later, Ms Collins announced the government was getting fertiliser to farmers “faster” by streamlining border processes of imported goods.
