Fertiliser in Focus: Why Australian Farmers Are Paying More for a Critical Resource

Every harvest begins long before the first seed is planted. One of the most important ingredients is fertiliser, and in recent years Australian farmers have discovered just how vulnerable global supply chains can be.

Conflicts in Eastern Europe and the Middle East have highlighted how events thousands of kilometres away can directly influence the cost of producing Australian food.

Why fertiliser matters

Modern agriculture relies on three major nutrients:

• Nitrogen – for plant growth and leaf development.
• Phosphorus – for strong roots and crop establishment.
• Potassium (potash) – for plant health, water regulation and grain quality.

Without adequate fertiliser, crop yields can fall dramatically. For grain growers, vegetable producers, sugar cane farmers and many grazing enterprises, fertiliser is one of the largest annual operating expenses.

Australia imports much of what it needs

Although Australia manufactures some fertiliser products, the nation remains dependent on imported raw materials and finished fertilisers.

That means local prices are influenced by:

• International commodity markets.
• Shipping costs.
• Exchange rates.
• Global energy prices.
• Geopolitical tensions.

 

Russia's influence

Russia is one of the world's largest exporters of fertilisers and fertiliser ingredients.

Since the invasion of Ukraine, sanctions, shipping disruptions and uncertainty surrounding trade have pushed global prices higher. Although fertiliser exports have continued in many markets, buyers have faced increased costs, longer delivery times and greater volatility.

When one of the world's largest suppliers experiences disruption, prices tend to rise everywhere.

Iran's role

Iran is a significant producer of natural gas, the key ingredient used to manufacture ammonia.

Ammonia is the building block for nitrogen fertilisers such as urea.

When tensions in the Middle East increase, markets become concerned about:

• Natural gas supplies.
• Shipping through the Strait of Hormuz.
• Higher insurance costs for vessels.
• Increased freight charges.

Even if Australian fertiliser does not come directly from Iran, global energy markets react quickly to uncertainty.

Energy drives fertiliser prices

Nitrogen fertiliser is one of the most energy-intensive industrial products to manufacture.

When natural gas prices rise:

• Fertiliser factories become more expensive to operate.
• Some overseas plants temporarily reduce production.
• Global supply tightens.
• Prices increase internationally.

This is one reason fertiliser prices often move alongside energy markets.

What does this mean for Australian farmers?

Higher fertiliser prices increase the cost of producing:

• Wheat
• Barley
• Canola
• Cotton
• Fruit
• Vegetables
• Pasture for livestock

Farmers must then decide whether to:

• Apply less fertiliser and accept lower yields.
• Maintain application rates and absorb higher costs.
• Delay purchases and hope prices fall.

Each option carries financial risk.

Can Australia reduce its dependence?

Many agricultural groups argue Australia should strengthen domestic fertiliser manufacturing.

Australia possesses abundant natural gas reserves and has the technical capability to expand production. Supporters believe greater local manufacturing could improve supply security and reduce exposure to international disruptions.

However, new plants require significant investment, long approval processes and confidence that they will remain commercially viable for decades.

The Rural Times View

Australian farming has always depended on weather. Increasingly, it also depends on world events. Wars, shipping routes, energy markets and international politics can all affect the price of fertiliser before a single crop is planted. Building more resilient domestic supply chains may become just as important to Australia's food security as good rainfall.