Global fertilizer supply chains already strained by geopolitical tension have faced a fresh shock following the de facto closure of the Strait of Hormuz, a key global trade chokepoint, after the escalation of conflict between Israel, the U.S. and Iran in late February. For Australian agriculture, which relies on consistent access to nitrogen fertilizer to maintain output, the disruption created an urgent supply gap that has now been resolved through a bilateral government-backed deal with regional partner Indonesia.
The agreement, finalized Thursday between Australia’s largest domestic fertilizer producer, New South Wales-based Incitec Pivot Fertilisers, and Indonesian state-run fertilizer giant PT Pupuk Indonesia, will deliver 250,000 tonnes of urea – the world’s most widely used nitrogen fertilizer – to cover the final 20% of Australian farmers’ total demand for the 2025-2026 growing season running from November 2025 through October 2026. Shipments of the additional fertilizer, which will be sold at prevailing global market prices, are scheduled for delivery between May and December 2025.
Prime Minister Anthony Albanese framed the deal as a landmark outcome for both Australian agricultural producers and regional food security. “We understand how critical fertilizer is for Australian farmers, for our domestic food production system and the food security of our entire region,” he said. “This deal also demonstrates why maintaining strong, mutually beneficial relationships with our immediate regional partners is so critically important when global supply chains face disruption.”
The conflict-driven disruption of the Strait of Hormuz has rippled far beyond energy markets, which have borne the brunt of the closure. Around 30% of all global nitrogen and phosphate fertilizer trade transits the strait annually, leaving major importers like Australia scrambling to source alternative supplies to avoid planting season shortages. Albanese emphasized that the interdependence of regional economies makes coordinated action essential to weathering global uncertainty: nearly 60% of Malaysia’s wheat and 75% of its lamb and beef originate from Australian farms, while Indonesia and other regional neighbors supply key inputs that keep Australian agriculture running.
Australian Agriculture Minister Julie Collins said she had worked around the clock alongside industry stakeholders to lock in alternative supply after the Hormuz disruption, and expressed deep gratitude for Indonesian government cooperation. “This guarantees supply of fertilizer to Australian farmers at this critical time,” Collins said. “It also means Australia can continue to play its important role supporting food security in Indonesia and the broader region at a moment of widespread global uncertainty.”
The fertilizer deal announcement caps two back-to-back multi-day diplomatic trips by Albanese to Southeast Asia, aimed at deepening regional economic and food security cooperation. Most recently, during a visit to Kuala Lumpur, Albanese and Malaysian Prime Minister Anwar Ibrahim signed agreements to expand collaboration on sustainable food production, including shared expertise in agricultural production techniques and irrigation infrastructure. Anwar noted that these bilateral supply agreements have a far more direct impact on ordinary people than many voters realize. “When supply chains are disrupted and food prices are rising, agreements like this have a direct impact on people’s lives,” he said. “The distance between a signed agreement and a family’s dinner table is shorter than most people imagine.”
Alongside the fertilizer deal, Australia and Malaysia also agreed to a new partnership focused on red meat processing and trade expansion. For Australian industry, the new urea supply from Indonesia marks a major step forward in shoring up critical inputs for the upcoming growing season, though industry leaders note work remains to fully meet long-term demand. Scott Bowman, president of Incitec Pivot Limited, said the additional volume “is another critical plank in servicing the needs of Australian farmers.” “Whilst there is more work to do to ensure farmers’ requirements can be fully met this upcoming season, this additional volume will go a long way to shoring up critical supplies to Australian growers,” Bowman said.