How Australian farms will take a hit from Russian invasion

Cost pressures on business are set to extend to the farm sector, propelled by the Russian invasion of Ukraine’s impact on rising energy and fertiliser prices.

May 16, 2022, updated May 16, 2022
Australia's agriculture exports are set to top a record $80 billion.(file image)

Australia's agriculture exports are set to top a record $80 billion.(file image)

The report released by Rabobank today says increases will be felt sharpest across most commodities in the second half of this year, as lost production from the Black Sea region intensifies.

RaboResearch general manager for Australia and New Zealand Stefan Vogel said food supply chains, already under stress from the pandemic, would need to prepare for further volatility.

“Ukraine in the 2021/22 season without the war would have shipped about as much wheat, barley and canola to the world market as Australia in the current record season,” he said.

“In addition, Ukraine’s corn export volumes are again about the size of the whole Australian grain and oilseed export volume.

“As the war started in February 2022, Ukraine had already shipped at least half of the season’s volumes.

“Consequently, the world has not yet felt the full impact of the heavy absence of Ukraine’s supplies.

“However, this is about to change from July onward when Ukraine harvests its next crop.”

Vogel said the planned next round of EU sanctions on Russia were likely to be more negative for farmers as input costs were tipped to run higher than commodity prices.

In the wake of the pandemic and geopolitical conflict, export logistics were also at their limits, preventing Australian grain growers in particular to take advantage of higher global prices.

Global fertiliser prices also reached all-time highs in early April, the report said, because Russia and Belarus are major exporters of various fertiliser types.

“Fertiliser prices elevate with grain prices and the current high price period is not an exception,” Vogel said.

“And while Australia does not typically import much of its fertiliser needs from the Black Sea region, we are importing most of our needs from the world market and therefore we will still face a tough fertiliser market in the coming months.

“Australia may face some temporary shortages for certain products as key import competitors like Brazil and India will also try to secure their needs in the global market.

“Given Australia’s import dependence for fertiliser, our fertiliser chain is more vulnerable than usual.”

While it is unknown how the cost-price squeeze will flow through to the checkout, motorists should expect no relief at the bowser any time soon.

Vogel said the EU’s plan to ban Russian oil imports by late 2022, could increase the crude oil price, currently above $US100 a barrel, by as much as 50 per cent if the sanctions come tp pass.

“As Australia is a net importer of crude oil, the global energy price volatility will be felt by consumers here,” he said.

“Crude oil and diesel price increases due to the war will add to costs in farming and the supply chain.”




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