New Zealand’s farming sector is bracing for a painful cost season as the ongoing conflict in the Middle East disrupts global fertiliser supply chains, threatening to push on-farm inflation to levels not seen since 2022.
About 40 percent of the nitrogen fertilisers used in New Zealand comes from the Middle East. The region is also a major producer of the liquid natural gas used to manufacture fertilisers, meaning the supply chain risk runs far deeper than simple shipping logistics. When conflict flares in and around the Strait of Hormuz, New Zealand farms feel the pressure within weeks.
Since the war in Iran began in late February, spot prices for urea, ammonia, and nitrogen-based fertilisers have surged. Agricultural pilots, who spread hundreds of thousands of tonnes of product across New Zealand farmland every season, are already passing the extra costs on to their clients.
Tony Michelle, executive officer of the Agricultural Aviators’ Association, said the timing of the disruption could hardly have been worse. “Everybody’s a bit nervous,” he told RNZ in March. “In terms of the medium term, our biggest concern is that this is a critical time of year for ag operators and for farmers, in terms of fertiliser application in particular. Pricing’s through the roof, and just like everybody in the community, we’re facing significant increases in fuel pricing, which operators have to be able to pass on to the end user.”
Autumn is traditionally one of the busiest periods for aerial fertiliser work in New Zealand. Applications in late summer and autumn help pastures recover from dry summers and prepare them for the cooler months when grass growth slows. Any disruption to that cycle carries productivity consequences that stretch well into the following year.
Mike Whitty, chief operating officer at Ravensdown, one of New Zealand’s two major fertiliser cooperatives, said the company had secured enough supply to cover autumn demand and was monitoring prices daily. He noted that a previous flare-up involving Israel, the United States and Iran last June had caused nitrogen prices to rise by roughly 15 percent before falling back about two weeks later. But he cautioned that a longer conflict would be a fundamentally different proposition.
“We are expecting a significant spike in prices, we are watching the price daily and everyone is waiting to see what happens in the strait because a lot of the world’s fertiliser trade travels through there,” Whitty told RNZ. He said Ravensdown was actively exploring alternative supply sources in Malaysia, Brunei, Indonesia and parts of Africa if the Middle East disruption proved prolonged.
Ravensdown confirmed in April that it was managing customer orders carefully, recognising that price certainty and reliable supply were critical to farmers’ planning for the season ahead.
The cost pressures are arriving at an already difficult moment. Dairy export returns, the backbone of New Zealand’s agricultural revenue, are softening at the same time. The most recent Global Dairy Trade auction recorded an average price fall of 2.7 percent to US$4,143 a tonne. That decline compounds the problem for dairy farmers already facing higher bills for fuel, freight, and now fertiliser.
Mike McIntyre, head of commodities at investment firm Jarden, warned that the parallels with 2022 were both striking and worrying. In that year, national consumer price inflation ran at around 7 to 8 percent, but on-farm inflation reached between 17 and 18 percent as input costs outpaced the broader economy by a wide margin.
“There’s going to be inflationary pressures come from the likes of fertiliser as well. A lot of fertiliser comes out of that part of the world. And then feed prices and even just general haulage prices as well,” McIntyre told RNZ. “I think we possibly are going to be in a position like we saw back in 2022, where the CPI for New Zealand as a whole was around that 7 percent to 8 percent mark, but on-farm inflation was more like 17 percent or 18 percent. So I think farmers are going to bear a lot of the pain that is going to be felt in terms of the increase in prices.”
The fuel side of the equation is already hitting hard. West Coast farming operation Gavins reported paying an additional $60,000 per week in fuel costs since prices rose following the escalation in Iran, according to RNZ.
For New Zealand’s export-oriented agricultural sector, the combination of lower commodity prices and higher input costs creates a margin squeeze that can take many months to fully absorb. Many farmers lock in fertiliser contracts well in advance, and some are only now beginning to see the full impact of recent price movements flowing through their accounts.
The broader economic context adds further weight to the pressure. New Zealand’s Budget forecasts have already been revised as the government grapples with the downstream effects of the global oil price shock, and analysts have flagged the prospect of a prolonged period of above-average on-farm inflation that could outlast the initial supply disruption.
There is no certainty about how long the Middle East disruption will last. Short conflicts have resolved quickly in the past, and fertiliser prices have snapped back. But a sustained war would test New Zealand agriculture’s ability to absorb costs in ways the sector has not faced since the inflationary peak of 2022.
For now, Ravensdown says it has the supply needed for the immediate season and is working to secure alternatives. The real test will come if the conflict extends into winter, when spring fertiliser planning begins in earnest and new contracts need to be placed.
What the next few months bring for New Zealand’s farmers may depend as much on events half a world away as on anything happening closer to home.
Are you a New Zealand farmer dealing with rising input costs this season? Share your experience in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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