Navigating geopolitical disruption
Agribusiness
Australia’s agribusiness sector is among the sectors most heavily impacted by rising fuel, fertiliser, nutrient and freight costs
Stable access to fuels, fertilisers and nutrients underpins planting, harvesting, irrigation and transport, and even short delays during time‑critical, seasonal windows can result in lost output, spoiled product and significant cash‑flow strain.
These challenges are being compounded by supply and distribution chain disruption, higher insurance costs and congestion and delays across maritime import and export routes.
In this environment, agribusinesses are being forced to reassess traditional commercial assumptions. Pressure is mounting on supply, distribution and customer contracts, financing arrangements and operating models that were not designed for this type of prolonged volatility and geopolitical disruption.
Resilience now depends on early action – for example, triaging key agreements, securing alternative energy sources, stress‑testing business and risk management plans and engaging proactively with financiers, counterparties and regulators to protect continuity, margins and long‑term viability.
What this may mean in practice
- Sharp rises in fertiliser, nutrient and fuel prices are squeezing margins
- Higher third party costs such as from freight providers and higher insurance costs can also impact margins and cash-flow
- Disruption to maritime export chains can impact distribution of product and ability to meet contractual obligations.
- Heightened food security risk
- Import and export dependent regions and businesses face significant exposure.
Emerging issues / developments
- Seeking to re-negotiate customer contracts to agree allocation of the additional costs that are impacting agribusinesses (to minimise impact on margins)
- Re-negotiating or entering into contracts to secure alternative and diversified energy sources, such as biodiesel or local hydrogen suppliers, where infrastructure exists
- Engaging through industry groups to ensure agriculture is classified as an 'essential user' under emergency legislation if introduced, ensuring priority access to liquid fuels during a crisis
- To the extent a business is looking to re-negotiate prices, consider whether cooperative or joint buying groups could be helpful (via class exemptions or ACCC approvals)
- Regulators and businesses considering whether temporary regulatory flexibility could be provided to minimise fuel disruptions in logistics and transporting of feed / livestock / harvest (eg driver hours or logistics rules)
- Agribusinesses are often in regional or remote areas will the fuel shortage impact availability of workforce (including international workforce)?
Key considerations
- Do we need COVID-style emergency funding facilities available to ensure we have access to funding should price shocks continue?
- What impacts are there on financial covenant compliance in debt documentation?
- Are force majeure clauses triggered within any customer or supplier contracts?
- To the extent a business is looking to re-negotiate prices, are there any cooperative or collective purchasing options that can be pursued (noting any ACCC compliance concerns)?
- Imminent / current Autumn harvests likely to make scarcity more acute
What to think about now
- Triage key contracts (customer, fuel supply, aviation fuel supply, power, logistics, planting, harvesting, livestock transport, freight, shipping, irrigation) for provisions regarding force majeure events, price adjustment or pass through, volume commitments, change in law and termination risk
- Engage lenders and insurers early if fuel costs or flow on event materially affect cashflow forecasts
- Consider repricing production contracts to reflect extraordinary input volatility
- Consider prioritising fuel use by seasonal criticality
- Consider whether contractors can be scheduled or rescheduled to minimise duplication of travel
- Stress‑test operating models, budgets and farm plans against prolonged fuel and freight volatility
- Review hedging and procurement strategies, including alternative supply arrangements and on‑farm generation or storage options. Consider diversifying supplies or depot, particularly for regional or remote areas if possible
- Engage early with JV partners, financiers and key contractors on risk allocation, funding headroom and contingency planning
- Confirm insurance coverage and notification requirements for business interruption, supply chain and political risk
- Call on any warranties available to ensure machinery servicing is up to date to maximise on-farm fuel efficiency. Consider whether any precision agricultural technologies could be acquired to cut unnecessarily passes
- Consider impact on workforce – will this impact the availability of staff in the coming periods?