Canegrower Dean Cayley has never needed to ask his neighbours for a cup of sugar, but the escalation of the war in Iran has left him going cup-in-hand for a tonne of fertiliser.
“One grower had a bit stored and he probably only had about five tonnes,” Mr Cayley said. “We use on average up to 70 tonnes just for my farm.”
For Mr Cayley and thousands of other Australian farmers, the conflict in the Middle East has ceased to be a distant geopolitical crisis and has instead grow a direct threat to their livelihoods. The closure of the Strait of Hormuz has choked the flow of urea—a critical nitrogen-based ingredient in fertiliser—exposing a dangerous Australia’s fertiliser deficit that now threatens winter planting cycles.
“Nothing grows without fertiliser and water,” Mr Cayley said.
Most of Australia’s urea supply is from the Persian Gulf. (ABC Mid West & Wheatbelt: Jo Prendergast)
A fragile reliance on the Persian Gulf
Australia’s agricultural security is currently tethered to a volatile region. Approximately 60 per cent of the nation’s urea supply is sourced from the Persian Gulf, leaving the domestic food chain vulnerable to any disruption in the Strait of Hormuz.
The impact has been immediate. Since the outbreak of the Iran war, the price of urea has surged by roughly 60 per cent. Market reporter Susy Cornford of Argus Media noted that while many growers secured enough urea for their initial application, supply is expected to be critically tight for the second “top dressing” application required during the peak season from March to July.
This scarcity is creating a phenomenon known as “demand destruction,” where prices rise so steeply and supply drops so low that demand effectively vanishes since the input becomes unviable for the farmer. “When the prices are so high and there’s so little supply that there can’t be any demand,” Ms Cornford said. “But I think that if there is supply, it will be bought.”
Current logistics are a matter of “boat watch” for the industry. Recent reports indicate that 235,000 tonnes of urea are currently in transit across nine vessels, accompanied by another 225,000 tonnes of phosphorous fertilisers.
Growers rely on fertiliser to plant their winter crops. (Supplied: Queensland Alliance for Agriculture and Food Innovation)
The cost of industrial decline
Australia was not always this dependent on foreign imports. For more than 50 years, a facility at Gibson Island near Brisbane, Queensland, provided a domestic buffer. However, that plant ceased urea manufacturing in early 2023, citing the prohibitive cost of natural gas—the primary feedstock for urea production.
Stephen Annells, chief executive of Fertilizer Australia, describes a two-decade slide in domestic manufacturing driven by a combination of high energy costs, environmental laws, and industrial relations issues. “In this situation, the cost of gas to Australians is prohibitive,” Mr Annells said.
The economic consequences are now trickling down to the consumer. With 3.8 million tonnes of urea imported in 2025 alone, the volatility of the global market is directly impacting farm gates. Some growers are already calling for consumers to share the burden of these rising input costs to ensure the viability of future harvests.
A strategic pivot toward onshore production
The current crisis has reignited the push for a domestic manufacturing comeback. The centerpiece of this effort is a project by Perth-based Perdaman Industries to establish a plant in Karratha, Western Australia. Once operational, the facility is expected to produce 2.3 million tonnes of urea annually.
The federal government has signaled that onshore urea production is no longer just an industrial goal, but a national security imperative. Through the Northern Australia Infrastructure Facility and Export Finance Australia, the government has already invested $490 million into the project.
Perdaman Industries founder Vikas Rambal has indicated the plant could be completed by January 2027—four months ahead of the original schedule—provided an additional $200 million in government investment is secured and visas are expedited for 400 specialist workers from India.
Federal Minister for Industry Tim Ayres has stated the government is exploring market interventions and a gas reservation scheme to lower the cost of energy for such projects. “This development in Western Australia in 2027 will mean we have onshore domestic urea production,” Mr Ayres said. “That is a vital economic resilience measure.”
Tapping the Georgina Basin
While urea dominates the nitrogen conversation, phosphorous fertilisers represent another critical vulnerability. Despite having some of the world’s largest phosphate deposits in the Georgina Basin—spanning north-west Queensland and the Northern Territory—Australia still imports the bulk of its phosphorous supply.
Currently, North West Phosphate mines between 50,000 and 100,000 tonnes of rock annually, but most of it undergoes minimal processing before being sold to the horticulture and turf industries. Managing director John Cotter noted that the company avoided producing finished synthetic fertilisers due to the high cost of electricity and gas.
However, the landscape is shifting. The Phosphate Hill plant, which was slated for closure in September, was recently saved by a $100 million acquisition by Mayfair. Mr Cotter is now working with state and federal governments to fast-track production expansions that could eventually allow Australia to export phosphate products, rather than just importing them.
About 90 per cent of Australia’s phosphate deposits are in the Georgina Basin. (Supplied: Geoscience Australia)
Key Metrics of Australia’s Fertiliser Dependency
| Metric | Current Status/Value | Target/Impact |
|---|---|---|
| Persian Gulf Supply Share | ~60% | High vulnerability to Hormuz closure |
| 2025 Urea Imports | 3.8 million tonnes | Heavy reliance on global shipping |
| Urea Price Increase | ~60% | Since outbreak of Iran war |
| Perdaman Plant Capacity | 2.3 million tonnes/year | Target completion January 2027 |
| Govt Investment (Karratha) | $490 million | Via NAIF and Export Finance Australia |
The immediate future for Australian growers remains precarious, relying on the arrival of ships currently in transit. However, the crisis has provided the political and economic impetus to rebuild a dormant industry. The next major checkpoint for national resilience will be the progress of the Karratha plant toward its January 2027 completion date and the federal government’s decisions regarding gas market intervention.
Do you believe Australia should prioritise domestic manufacturing over cheaper imports for food security? Share your thoughts in the comments below.
