Supporting Australian agriculture through times of uncertainty

Ammonia. Phosphate. Urea.

Until recently, these three words mostly sat within the vocabulary of farmers, the chemical industry and a few business economists.

Now, because of the conflict in Iran and the disruption of shipping through the Strait of Hormuz, there’s growing mainstream awareness in Australia of just how important these fertilisers are to food producers and supply chains.

Australia imports much of the fertiliser and fuel it uses in agriculture. For urea, one of the most critical inputs for cropping, we’re entirely reliant on overseas supply.

Alongside soaring fuel prices, the trade of products made from Middle Eastern oil and gas industries has been constrained. Shortages are creating a significant effect on agribusiness and related industries.

Just as they gear up for the winter-planting season, farmers who were already battling surging diesel prices are now beginning to ration nitrogen-based fertiliser. The situation is particularly acute for cropping businesses, which are heavily dependent on urea in the weeks ahead.

Urea prices have effectively doubled since the start of the conflict, but availability now threatens to become just as much of an issue. Around two-thirds of Australia’s nitrogen fertiliser imports are sourced from the Middle East.  Even alternative urea supplies from Asia partially depend on Middle Eastern ammonia and natural gas supplies.

With its strong concentration in grain and oilseed production, Western Australia is particularly exposed to this supply shortage risk. The state’s largest fertiliser provider has triggered “force majeure” clauses on urea contracts, reinforcing concerns about future availability.

Our customers, and farmers more broadly, are adopting a pragmatic response: actively revising their cropping programs and taking steps like shifting crop mixes toward barley or other crops that require less urea. 

This is all happening at a time when, unlike in previous periods of higher input costs, cropping businesses are unable to offset the cost pressure through higher commodity prices. Global grain prices have eased from recent highs, offering little relief on the revenue side.

This squeeze could become a significant speed bump to the momentum that had been building in Australia’s agriculture sector over the past couple of years.

Recent ABARES forecasts indicate the gross value of agricultural production is now expected to ease to around $95 billion in 2026–27, from an expected high of $101 billion in 2025-26, with average farm profits also forecast to decline following several strong seasons.1 Seasonal conditions are adding further complexity, with a drier-than-normal autumn now more likely and some regions facing continued drought.

If fertiliser supply constraints persist or farmers cut application to cope, the impact may extend beyond margins, with reduced fertiliser use having the potential to materially impact harvest and production volumes. In more severe scenarios, CBA economists estimate 2026–27 output could fall by as much as 25 to 30 per cent.

Higher fuel costs are also hitting freight and logistics in the agricultural supply chain, including carrying inputs to farm, moving grain to port, and getting produce into domestic markets. And that’s before considering the fuel needs of farm operations themselves.

At the same time, rising costs are being felt in processing and packaging, affecting fresh produce businesses across refrigeration, packaging materials and distribution. All of this adds further pressure to margins.

This interconnectedness means decisions made on-farm now have broader implications across the entire agribusiness supply chain.

Some customers tell us they’re running out of room to absorb costs and that margins are being worked “right down”, particularly where fuel levies can’t be fully passed on. Others say they’re using short‑term funding to manage timing mismatches between cost and revenue.  

We know this because our team of more than 700 regional and agribusiness bankers have been proactively contacting thousands of customers across the country to understand pressures and offer support. 

Encouragingly, most agribusinesses remain well capitalised, with solid cash buffers and some headroom still available. Weather conditions and commodity prices had also largely been favourable before the current disruption, providing a degree of resilience. 

Even so, a key issue now is working capital, with cash-flow pressure expected to peak around May and June as fuel and fertiliser invoices fall due.

We know strong bank support will be critical, which is why we’re already working with customers to provide capital, flexibility and practical guidance, helping farmers and regional businesses navigate what we all hope will be a short-term disruption.

And it may be as straightforward as having early visibility of any emerging cash flow pressures, so we can better understand a customer’s broader financial needs.

The priority for our team is to stay connected to our customers and offer support where it’s needed most, especially as those same three words continue to dominate the conversation in the months ahead.

We’re here to help.

Kylie Allen is Commonwealth Bank’s Executive General Manager, Regional and Agribusiness Banking.

This article was first published in The Australian and is reproduced with permission. 

1. ABARES Agricultural Commodities Report March 2026 - https://www.agriculture.gov.au/abares/research-topics/agricultural-outlook/march-2026