Peter Nicholl
We are already seeing one of the negative impacts of the war in the Middle East in the prices of petrol and diesel at our petrol pumps. We don’t yet know if this will turn into a supply problem also and lead to some form of rationing.
Peter Nicholl
There is a second critical resource for New Zealand that is also being affected by the turmoil in the Middle East. That is fertiliser. New Zealand is one of the world’s largest exporters of dairy products, beef and veal. And our farms depend on imported fertiliser. Without fertiliser, grass and crop yields will fall and so will our exports. We are already running a current account deficit despite having favourable terms of trade. In the year ended December 2025 the current account deficit was $16.3 billion, or 3.7 per cent of our GDP.
In 2024, New Zealand imported almost $500 million of fertiliser. Over half of that fertiliser came from two countries – Saudia Arabia and China. Fertiliser exports from both of these countries are being negatively affected by Middle East developments. In China’s case their production is falling as it uses natural gas from the Middle East. As a consequence, China has imposed export restrictions on its fertiliser industry. These restrictions affect between half and three-quarters of its fertiliser exports. China’s position is clear. If there is going to be a shortage of supply of fertiliser it isn’t going to affect them – it will affect their customers, one of which is New Zealand.
As with petrol and diesel, the Middle East events have already had a dramatic price effect on fertiliser. For example, the price of urea per ton was US$445 in late February. On 14 April it was US$719 – an increase of 62 per cent in less than two months. These huge price increases will reduce the amount of fertiliser New Zealand farmers will use when they plant for next spring.
As with petrol and diesel, whether we get a supply shock as well depends on how long the crisis in the Middle East goes on. When I started thinking about writing this column on April 17, the Strait of Hormuz was open, and some form of talks were going on. When I finished writing the column on April 19, the Strait was closed again, and the parties were back to exchanging insults. The participants don’t know what will happen next so there’s no way anybody else can know.
Should New Zealand have been aware of the risk the country could face from price and supply shocks for fertiliser and, if we were, should we have done something about it? The answer to the first question is clearly yes. The New Zealand Fertiliser Association reported on the issue a few years ago and concluded that ‘New Zealand was uniquely vulnerable to fertiliser supply disruption’. Has there been any policy action in response to this clear warning? No. Urea production is based on natural gas. We have natural gas. We stockpile petrol and diesel because of potential supply shocks. We could stockpile fertiliser for the same reason. I don’t think we are helpless. But the response, as it seems to be so often, was let’s wait and see and hope it doesn’t happen. That strategy is looking more and more misguided and risky every day.
Peter Nicholl
