Wheat producers are reacting to a three-month conflict in the Middle East that has closed the Strait of Hormuz and roiled global commodity markets. That bottleneck has upended agricultural trade flows and pushed fuel costs higher across shipping and land transport.
Rabobank now expects oil prices to average about $US120 a barrel in coming months, up from roughly $US70 before the conflict. Higher energy costs feed directly into the cost of running farm machinery and producing chemical fertilisers.
Rising fertiliser prices matter because grain producers depend heavily on nitrogen and other inputs to maintain yields, particularly in dry conditions. When energy costs spike, fertiliser manufacturers pass those costs through, leaving farmers to decide whether to cut application rates or reduce planted area.
Many growers are choosing to scale back wheat acreage rather than absorb sharply lower margins. That decision reflects both the immediate hit from fuel and fertiliser and the risk that dry weather further undermines yields.
Australia is especially vulnerable to these shocks because its grain sector relies on energy and fertiliser imports from the Middle East more than other major producers. Any disruption through the Strait of Hormuz quickly flows into local input prices and supply reliability.
Analysts warn that this exposure, combined with reduced wheat plantings, could tighten domestic grain availability and push food prices higher.
