Rural
By Michael Burt
The Bellingen Shire’s historic dairy farming sector is facing unprecedented cost increases for fertilisers and other key farm inputs due to the Middle East conflict.
The Strait of Hormuz shutdown has delivered a double shockwave to local farmers, who have felt the brunt of a surge in diesel prices and skyrocketing prices and uncertainty in the fertilizer market.
Farmers are copping a fuel levy on incoming inputs, and common fertilisers like urea have almost doubled in price. Other essential inputs like poly pipe and silage wrap have also seen significant increases.
The cost of production shock has prompted the dairy farmer groups across the country to call for a 30-cent increase in retail milk prices and a guarantee that it will be passed through processors to farmers.
“Australian consumers currently enjoy some of the cheapest fresh milk in the developed world, but our farmers are facing some of the highest production costs,” Australian Dairy Farmers President Ben Bennett said.
“Previous analysis by The Weekly Times showed consumers in New Zealand were paying $A2.64 for a litre of home brand milk, while prices averaged $A2.20/litre in Canada, $2.44/litre in France and $A2.05/litre in South Africa and $A2.05/litre the US.
“A modest increase in retail milk pricing would help ensure farms remain viable and continue producing this essential, nutrient-rich food, but only if that value is passed back through the supply chain.”
New South Wales Farmers Dairy Committee Chair Malcolm Holm said the current situation is not sustainable, without structural change.
“Farmers are price-takers. We don’t control the price we receive, yet we are carrying the burden of rising costs,” Mr Holm said.
Dorrigo dairy farmer Julie Moore strongly backs the united call for supermarkets to increase the retail milk price, provided most of it goes back to the dairy farmer.
“I spoke with a lot of consumers at the Royal Easter show, and they were happy to pay for their milk as long as the farmer recieved it,” Ms Moore said.
“With the big increases in diesel and electricity costs as well, dairy farmers will need an increase of around 30 cents a litre to break even.”
Alongside fellow dairy farmers in the plateau, the Moore family farming business is still recovering from the economic impact of the Waterfall Way closure.
Ms Moore said the price and availability of urea has had a significant impact on the family business.
“We ordered 20 tonnes of urea back in November, but we have since be told that can only guarantee eight tonnes at significantly higher price of nearly $2000 per tonne,” Ms Moore said
“We need urea to keep the grass growing for the cows in Winter. We would normally be using it May after the first grazing of the early planted pastures and then after every second grazing.”
“It’s not just fuel and fertiliser. Poly pipe has gone up 100 per cent in price.”
The Moore family’s processor, Norco, increased its farmgate milk price by 5 cents per litre to 97 cents in May. Australia’s largest milk processor, Lactalis, did the same with its 800-plus suppliers.
Reports from dairy farmers align with the Rabobank’s annual Australian Dairy Outlook, which calls the 2026/27 season as “limited margin for error” for farmers and processors.
Released last week, the report, says escalating input costs – led by fuel, fertiliser, water, labour and interest rates – remain the dominant pressure for the nation’s dairy producers.
“These are eroding sector confidence and pushing cost of production to levels that leave current milk prices near break even,” RaboResearch senior dairy analyst Michael Harvey.
“Navigating the 2026/27 season will require disciplined cost management and careful capital allocation as well as – for processors – prudent farmgate milk pricing strategies.”
“Prices for fuel and fertiliser – particularly urea, the most-heavily applied nutrient in dairy systems – have risen sharply. In addition, fuel surcharges are indirectly increasing the cost of a wide range of farm inputs and service provisions.”
Mr Harvey said these factors were compounding margin pressure beyond the farmgate and constraining the ability of processors to absorb additional cost shocks, increasing the likelihood of further passing on prices to consumers.
Farmer confidence plummets amid cost crisis
Farmer confidence about the year ahead has collapsed, with 80 per cent of farmers in NSW expecting business conditions to worsen in coming months.
That’s according to the latest NSW Farmers Farm Business Sentiment Survey, which revealed an 80 per cent price increases for fuel and fertiliser have flowed through to freight (up 60 per cent), farm chemicals (up 40 per cent) and labour (up 25 per cent).
The results has NSW Farmers warning state and federal governments must urgently respond to an acute cost-of-production shock caused by a conflict 12,000 kilometres away from the state’s farms.
“We were expecting a drop in conditions and confidence, but this is a stark warning to governments that food security, and the economic value of farm production, is taking an absolute beating,” said NSW Farmers President Xavier Martin.
“This data confirms the multitude of anecdotal reports that things are tough for farm businesses, and that should be a wake-up call for the nation.”
Survey respondents reported they were scaling back or decreasing the intensity of production by 22 per cent, while 36 per cent were changing cropping and stocking plans.
Mr Martin said governments must act quickly with practical, targeted measures that reduced the extraordinary costs faced by farming businesses to avoid even worse planting and stocking decisions over coming months.
“To stabilise production and protect regional jobs, we need immediate relief that lowers on-farm and supply-chain costs, and finance settings that help farm businesses maintain liquidity and keep operating through this period of uncertainty.”
NSW Farmers has proposed time-limited tax relief to directly reduce extraordinary cost pressures and support investment in on-farm storage and efficiency, including relief from payroll tax, insurance-related taxes and council rate increases where feasible, as well as waiving tolls and heavy vehicle charges and registration fees to ease freight costs.
Over the medium term, NSW Farmers called for expanded access to low or zero-interest finance and underwriting settings so farmers could refinance, maintain working capital, and proceed with cropping and stocking plans. This included new Rural Assistance Authority loan products to support efficiency and storage technology, faster access to relevant RIC loan products, and underwriting of existing farm insurance with exploration of underwriting options for new products, including crop, stock and weather cover.