Fuel and fertiliser volatility adds new pressure to Australian farming

Australian farmers are facing a new wave of cost pressures and access challenges as global geopolitical tensions begin to flow through supply chains, with diesel and fertiliser emerging as the most immediate risks to production and food prices. 

Instability in the Middle East is disrupting supply chains and creating uncertainty across global energy and commodity markets. For Australian growers, these disruptions have already translated into higher input costs, with cropping operations likely to feel the impact first and most intensely. If the conflict in the Middle East is prolonged, access to key inputs to production such as diesel and fertilisers may also be constrained.

Diesel costs affect every stage of production 

Diesel remains essential across the agricultural production cycle, from seeding and harvesting through to storage and freight. When fuel prices rise, the impact is felt quickly across on-farm operations, contractor costs and margins.

As fuel prices rise, the impact doesn’t stop at the farm gate. Higher fuel costs flow through freight and logistics, increasing the cost of moving grain to domestic processors and export ports. Over time, this pressure moves along the value chain, contributing to increased costs for farmers and ultimately higher prices for end consumers.

Fertiliser availability adds further strain 

Fertiliser markets are adding another layer of cost pressure, particularly as broadacre growers move into key planting decision periods. Australia’s heavy reliance on imported fertiliser means global market movements are quickly reflected in domestic pricing, increasing volatility and uncertainty around input costs.

In response, some growers may need to reassess application rates to manage near-term costs. While this can provide short-term financial relief, sustained reductions in fertiliser use can lead to lower yields and potential impacts on crop quality, affecting overall profitability over the medium term. 

Access to critical inputs and operational resilience 

While cost remains the most immediate pressure, access to critical inputs such as fuel and fertiliser presents a separate operational risk for agricultural producers. Prolonged supply disruption can expose vulnerabilities across operations and supply chains, particularly where access to key inputs is treated as a given rather than actively planned for. 

For input‑reliant sectors such as food and agribusiness, constrained access can affect production schedules, contractor availability and logistics coordination. These impacts influence operational resilience and the ability to respond effectively during peak production periods. 

Strengthening visibility over supply arrangements, logistics dependencies and contingency planning can support more resilient operations and reduce disruption risk when markets tighten. 

Flow on effects for crop prices and food supply chains 

The combined pressure from higher diesel and fertiliser costs is expected to place upward pressure on crop prices in the months ahead. While growers are likely to absorb the initial impact as reduced margins, these increases rarely remain contained within farming operations, resulting in broader implications for processors, exporters, and consumers as cost pressures move through the food system. 

Livestock producers will also face higher input and freight costs, although the effects may be less immediate compared to cropping businesses as fuel makes up a lower proportion of the cost base. However, for grain and broadacre producers the current environment is forcing difficult trade-offs around input use, case management, and reliance on favourable seasonal conditions to protect margins.

Practical considerations for navigating input volatility 

In volatile input environments, two useful disciplines include business continuity planning and improving financial visibility, particularly around cash requirements, scenario testing and decision levers. 

Business continuity planning can help respond to near-term shocks by developing a ‘playbook’ to enable ongoing operations in response to sudden changes in input costs and/or access. The playbook makes clear the trade-offs between operational pathways to support clear, methodical decision making. 

BDO’s food and agribusiness insights on forecasting emphasise that agribusinesses operate in an ever-changing environment, with common exposures including input costs, yield variability, pricing shifts, supply constraints and broader economic change. A well-maintained cash forecast can help businesses understand funding needs under different scenarios and identify which levers are available to manage operating and financing cash flows.

That same forecasting approach can also help businesses test the impact of changes such as contract pricing, crop variations, capital acquisitions and debt funding requirements which becomes particularly relevant when diesel and fertiliser costs shift quickly.

From an operational lens, fuel is increasingly best understood as a production dependency rather than a simple procurement line item. When volatility persists, strengthening visibility and governance around fuel exposure supports more confident decisions under pressure.

More broadly, sector guidance also highlights the value of benchmarking cost structures, identifying operational efficiencies, and actively managing working capital and funding needs in high-cost environments. 

How BDO can help 

In an environment of persistent fuel volatility, building resilience requires more than short-term cost management. BDO’s food and agribusiness team works with organisations across the sector to help them understand exposure, strengthen operational planning and make informed decisions across the supply chain. Contact us today to learn more about how we can support your business.