‘Real strife’: WA agribusiness watchers fear oil and fertiliser surge could push up food prices

West Australian shoppers will soon be forking out more at the supermarket, with farmers and food producers bracing for higher oil and fertiliser prices to bleed into production and retail costs amid the war in the Middle East. Benchmark Brent Crude prices rose towards $US83 a barrel after climbing about 12 per cent in just two days — the biggest gain since 2020 — as major petrol suppliers in the Middle East were forced to halt production due to drone strikes. And Iran has warned any ships attempting to sail through the Strait of Hormuz faced being “set ablaze” in retaliation to the blitz. For WA consumers and agribusinesses the impacts are feared to be far-reaching, with the crucial shipping channel offering passage to 20 per cent of the world’s oil supplies, and between 60 per cent and 65 per cent of Australia’s urea imports — a vital component in fertiliser. The most immediate impact will be felt at the petrol bowser, according to Chamber of Minerals and Energy WA chief economist Aaron Walker, with the “checkout, cafe and even local pub” potentially up next. “A 10 per cent increase in global oil prices flows through to about a 5 per cent increase at the pump,” he told The West Australian. “But it goes much broader than that. Those higher petrol prices flow through to transportation costs, which are obviously key to a range of industries across state.” In Perth, fuel prices skyrocketed to as much as $2.13 per litre. Petrol prices topped $2.40 a litre across swathes of Sydney’s eastern and inner-west suburbs on Wednesday, while Melbourne’s service stations have already increased regular unleaded prices to at least $2.19 a litre. Rabobank’s senior food retail analyst Michael Harvey on Wednesday warned supply disruptions in urea — a common fertiliser and animal feed supplement relied on by farmers — could be a catalyst for higher food prices. “The key risk that we see is higher food prices if oil prices stay higher for longer,” he said. “We have already seen a sharp rise in crude oil prices with further upside if the conflict is prolonged and supply chain disruptions worsen. This will lead to a spike in the cost of fuel on farm and through the supply chain. “Higher crude prices flow directly through to food and agricultural commodity markets, lifting both grain and fertiliser prices.” And with Australia in a crucial procurement window for fertiliser for the next cropping season, he warned the high input costs could eventually need to be passed on to consumers. “More broadly, higher oil prices can drive up other costs in the food ecosystem including processing, distribution and packaging costs,” he said. York cropping farmer and Pastoralists and Graziers chair Tony Seabrook said he was unable to source fertiliser through a broker this week, but fertiliser for this year’s crop was likely already in the State and unlikely to affect the quality of harvest. “The biggest impact is going to be urea, not pure nitrogen,” he said. “The base product they make urea from is petroleum, and so anything that impacts on petroleum prices will impact on urea prices — the stuff is dear enough without another increase.” Mr Seabrook said the effects for crop farmers was likely to be minimal if the conflict was short-lived, but if drawn-out Australian agriculture — crops, livestock, and horticulture — would suffer. “Optimistically, a large part of this threat may begin to dissipate reasonably quickly,” he said. “We will be in a real pile of strife if this is still going on a month from now — it’s as simple as that.” Western Australian Meat Marketing Co-operative chief executive Coll MacRury confirmed the suspension of chilled meat exports to the Middle East was made effective on Tuesday. “(The suspension) will stay like that until we know it’s safe and ships can get through the Strait of Hormuz.” He estimated about $50 million worth of chilled meats could be sent to alternative markets as a result of the conflict, and that any further shipments to the region would be too great of a risk considering the volatility of the conflict. “Our key customers take about 20 per cent of all the loins and racks we produce.” It’s understood there is no live export vessels with WA livestock on the way to the Middle East. The Federal agricultural department said it was working with industry and trading partners, a spokesperson said.