Global oil market disruptions driven most recently by geopolitical conflict in the Middle East and constraints around key shipping routes such as the Strait of Hormuz—are reverberating sharply through Australia’s grain sector.
In Victoria, these shocks are reshaping farm economics, production decisions, and the outlook for both domestic and global grain markets.
Recent global disruptions have caused diesel prices in Australia to surge—reaching levels above $3 per litre in most regions (at the time of writing) and pushed fertiliser prices to record highs. For Victorian grain farmers, this creates a double cost squeeze: Rising Diesel and fertiliser costs These pressures are immediate and unavoidable, particularly during critical sowing and harvest windows.
There are few winners in the current grain market situation; local up country silo bids have not increased by much at all against January prices, yet the delivered price for grain has risen around $30p/tonne for the same period due to the rise in fuel costs. So, the current scenario is the grower not getting paid anymore for their product, the transport service providers having to increase their rates just to cover costs of the delivery and consumers having to pay the increased landed price.
The timing of the 2026 oil shock has been particularly damaging, coinciding with the winter cropping season. Farmers are still nervous about the uncertainty of whether they can secure enough fuel and fertiliser to plant crops at all. In some regional towns, diesel shortages have already occurred, delaying operations and increasing logistical stress. Even where inputs are available, prices have surged dramatically. For Grain growers and other end users of Urea such as Stock feeders, prices have increased by 20% or more, exceeding $1,000 per tonne in some cases.
Despite rising production costs, global grain prices remain relatively subdued. But this can change easily especially considering how important Ethanol will be in helping solve the current crisis and that industries dependency on Soy and Corn for example. While farmgate prices may remain constrained, retail food prices are expected to rise also because of the dependency on key food products driven by the energy demands.
Global oil disruptions are no longer distant macroeconomic events, they are immediate, tangible pressures at the paddock level in Victoria. By driving up diesel and fertiliser costs simultaneously, they are squeezing margins, altering cropping decisions, and increasing uncertainty across the grain sector.”
In the short term, Victorian grain farmers face a difficult combination of higher input costs with a level of supply uncertainty and relatively weak commodity prices while export parity levels are low. A weakening AUD helps in making Australian grain more competitive into traditional overseas markets but also means the cost of inputs become more expensive. Both farmers and consumers face many challenges now navigating a difficult period. While uncertainty remains in the Middle East there will still be an element of market unpredictability outside normal fundamentals.
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Author
AuthorJustin Fay
Commodity Manager
