An agricultural expert has raised urgent concerns over the ongoing war in the Middle East, warning that the Strait of Hormuz must reopen soon to prevent Australian farmers from reaching a critical 'point of no return'. Farmers have already reduced their fertiliser usage due to soaring costs and limited availability, with a wheat grower in regional Victoria anticipating a 10 to 15 per cent drop in yield this year.
Global fertiliser supply under threat
The Strait of Hormuz has been effectively closed by Iran since the conflict began in February, sparking a global crisis as it carries approximately one-third of the world's traded fertiliser supply. In Australia, the price of urea, the most commonly used fertiliser, has surged from $845 per tonne in February to around $1,435 per tonne this month, according to analysis by GrainGrowers.
Ross Johns, president of the Wimmera Mallee Environmental and Agricultural Protection Association, said in his 44 years of farming, conditions have never been this extreme. 'We've seen high prices for fertiliser and farm inputs before, but not quite to this extreme. At the moment, the input prices are about 30 to 50 per cent higher than the previous highest in about 2008,' he said. Inputs encompass all costs farmers pay to produce, including wages, machinery, fertiliser, and fuel.
Family farm feels the strain
Johns' family has been farming wheat, barley, and canola in western Victoria since 1873. He inherited his first 3,500 acres in 1982, which has since expanded to 15,000 acres. Johns explained that his crops rely on urea throughout the year for a better yield, but rising costs have forced him to reduce fertiliser application this season. 'I just use a little less and use it more sparingly, but using less will ultimately result in lower crop yields,' he said. 'I'm expecting crop yields to be down 10 to 15 per cent on what they potentially could have been, and that's certainly going to have a significant negative impact on Australia's economy.'
Ripple effect on food prices
CommBank agricultural economist Dennis Voznesenski warned that reduced production will ultimately lead to higher food prices. 'If you have a 15 to 45 per cent reduction in your application, then the production impact is 9 to 25 per cent. Reduced production gradually leads to higher prices both offshore and locally,' he said. Voznesenski noted that Australian Premium White wheat prices have already risen 12.4 per cent in northern New South Wales and 19 per cent in southern Queensland since February. 'This is driven primarily by dry conditions and partly by increased fertiliser costs,' he added.
Voznesenski cautioned that by June, the world could reach a 'point of no return' if the Strait of Hormuz remains closed, with prices jumping shortly after. 'I'm just waiting to see if the strait is opened up or not, and at that point of no return — once we get to June, July, that's when I'll go, OK, so the world is going to be slightly different now. If large shipments still aren't leaving the Strait of Hormuz by the end of July, that's when the market is likely to start gradually pricing in the production impact,' he said.
Government response and future outlook
Despite these concerns, the Albanese government hopes to avoid reaching that point with a multi-billion-dollar fertiliser and fuel storage plan announced in the recent federal budget. Johns said farmers were encouraged by the investment directed at guaranteed fuel supplies and fertiliser. 'We've been trying to tell them that agriculture is a very important industry for Australia, and suddenly they have recognised it,' he said. However, Johns expressed concern that elevated inflation could push interest rates higher, adding further pressure on the sector. 'Most farmers have some level of debt, so that will have a negative impact on the agriculture sector,' he noted.
With no indication of when the war might end, Johns said the solution lies in developing Australia's own domestic urea supply. 'We are a huge gas exporter, and urea is made from gas; we could make our own,' he said. A urea and ammonia manufacturing plant, Project Ceres, is currently under construction in Karratha, Western Australia, and is expected to become the nation's largest urea plant. However, the project is not expected to be completed until mid-next year. 'We must rely on overseas supplies for some time to come yet,' Johns said.
After four decades in farming, Johns worries about the future of the industry he plans to eventually hand over to his son. 'I'm very supportive of young people in farming, but it's pretty tough starting out in agriculture at the moment. The government must understand agriculture not only feeds the population of Australia, but it also provides 14 per cent of Australia's exports,' he concluded.
