A strait in crisis reveals our agricultural vulnerabilities
The March 2026 near-closure of the Strait of Hormuz has revealed our agri-food economy exposure to concentrated supply chains of critical inputs.
The sudden disruption to maritime traffic, falling by roughly 70 percent within days and effectively to zero shortly thereafter, demonstrates our exposure to external shocks. Major carriers suspended all Hormuz transits, rerouting ships via the Suez Canal or even the Cape of Good Hope, increasing freight distances but also restricting access to resources that come from the Gulf states.
New Zealand exports to the Persian Gulf are worth $3.4 billion, three percent of total exports
While the disruption impacts New Zealand exporters, the closure’s implication for our fuel and fertiliser imports in particular is as, if not more, concerning. MFAT notes our exports to the region are dominated by dairy and meat shipments to the UAE and Saudi Arabia. Within this, New Zealand’s red-meat exports to the Gulf Cooperation Council (GCC), valued at NZ $298 million, rely mostly on the Strait of Hormuz for transit.
At least 4,000 Twenty-foot Equivalent Units (TEUs), which is a standard unit of measurement representing cargo capacity in standard shipping containers, of New Zealand meat and dairy cargo, equivalent to a single medium-sized cargo ship, are entangled in delays or rerouted already.
The critical economic exposure, however, lies on the import side with energy and fertiliser
New Zealand’s urea (a key nitrogen fertiliser) supply is heavily concentrated in the Gulf, with 290,010 tonnes imported from Saudi Arabia and 2,638 tonnes from Oman in 2024. Although New Zealand can still source other fertilisers, including phosphate from Morocco, soil health, much like human nutrition, depends on a balanced input of nutrients.
As the conflict disrupted shipping, global urea markets rapidly priced in the supply risk. Urea supply price moved from the mid-USD 440s in late February into the USD 500s by March 3, and by March 10, urea was at USD 585 per tonne, a 30 percent increase over the month. With roughly 35 percent of global seaborne urea exports originating in the Middle East, even short-lived disruptions can generate disproportionate moves in global nitrogen markets.
Domestic production provides little insulation
The Kāpuni ammonia–urea plant faces its own challenges. The facility produces around 260,000 tonnes of urea annually but depends entirely on natural gas as both fuel and feedstock. Ballance AgriNutrients assessed that if gas becomes unaffordable, or insufficient in supply, the plant may be forced into shutdowns lasting three to four months.
Indeed, the Strait of Hormuz is not only the world’s most critical oil transit point but also a major conduit for liquid natural gas (LNG). Because natural gas is the dominant input cost in ammonia–urea production globally, disruptions at Hormuz tighten LNG availability and raise global gas prices.
A dual-exposure problem
This impact was felt immediately by Europe, which saw a 70 percent price increase in LNG, while Asia saw a 50 percent increase as LNG carriers avoided the strait and insurers withdrew cover. LNG price increases transmit directly into global fertiliser markets, leaving New Zealand exposed both through its import needs and its gas-dependent domestic production.
As LNG and urea prices spike globally, imported fertiliser becomes more expensive; yet at the same time, domestic output cannot expand to compensate because of the same global gas market.
A silver lining?
One mitigating factor during this episode is the timing. This substantial disruption is occurring in the late-summer and autumn period when nitrogen application is more flexible. Farmers could defer the use of fertilisers without major productivity losses, providing a short-term buffer.
Conversely, northern-hemisphere producers are approaching their pre-spring planting window. This means northern producers bear the brunt of early price pressures, and any resulting yield constraints may in turn support commodity prices for New Zealand exporters later in the year if fertiliser prices come down.
Given the uncertainty around this conflict, ongoing structural vulnerabilities in the supply chain will continue to surface. New Zealand’s agriculture sector remains dependent on highly vulnerable maritime corridors. Urea imports are concentrated in one geopolitical region, and domestic urea production hinges on an increasingly constrained natural-gas market.
While the immediate disruption may fade, the strategic lessons it exposed will need to be learnt from, for example, the importance of diversification in supply routes and sourcing of critical inputs.