Planting of wheat, canola and other crops is set to gather pace this month across much of Australia and farmers need ample supplies of crop nutrients to support early growth.

The price of urea in Australia was quoted around A$1,350 (C$1,298) per ton this week, up about 60 per cent since the beginning of the U.S.-Israeli war with Iran, analysts said. Australian diesel prices are up 88 per cent over the same period.

“Farmers are trying to reduce fertilizer application and switching planting from nitrogen hungry crops like wheat and canola into feed barley,” said Dennis Voznesenski, an agricultural analyst at Commonwealth Bank of Australia.

“Some are also reducing planted area, but this so far is minimal,” he said.

Australia’s wheat planting could drop by 10 per cent to 12 per cent given the current conditions, from 12.4 million hectares a year ago, an agricultural broker and an analyst said. Cultivation of canola is also likely to decline despite higher returns, they said. Both declined to be named.

Australia is the world’s fourth-largest wheat exporter and No. 2 supplier of canola, selling to importers across Asia, the Middle East and Europe. It also sells crops such as barley, chickpeas and pulses.

Straight of Hormuz is fertilizer choke point

Farmers worldwide are struggling to secure fertilizer supplies as planting season in key countries gets underway, with the Strait of Hormuz, which carries 30 per cent of globally traded fertilizers, severely disrupted by the Iran war.

Bank of America warned that the conflict threatens 65 per cent to 70 per cent of global supplies of urea, a key nitrogen fertilizer, with prices already up 30 per cent to 40 per cent.

U.S. farmers plan to plant less corn and more soybeans in 2026 than last year, the U.S. Department of Agriculture said this week. China has curbed fertilizer exports, while India is tapping alternative sources to boost supplies for summer-sown crops.

Corn, wheat and canola usually require higher application of urea than barley and pulses.

“Australia typically relies on China for urea, but export curbs have limited shipments,” said StoneX analyst Josh Linville.

“Buyers turned to Indonesia, only to face further constraints there and by the time they sought supplies from the Middle East, the war had already started and the Strait of Hormuz had closed.”

Crops need fertilizer at the start of planting as well as in development and pre-maturity stages. Crops planted in April and May are harvested in November and December.

“It is a big issue as the cost of farming has risen sharply in the last one month,” said Tobin Gorey, founder of commodities consultancy Cornucopia in Sydney.

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The war, which has closed the Strait of Hormuz, has shut down fertilizer plants in the region and severely disrupted shipping routes, potentially curbing supplies to key importers around the world just as farmers in the Northern Hemisphere prepare to plant seeds.

“It’s a mess because it’s spring,” said Cedric Benoist, who farms wheat, barley and other crops south of Paris, referring to global fertilizer prices that have jumped by dozens of euros per metric ton. “This situation can’t continue.” Farmers from Srinagar in Kashmir to Saskatchewan in Canada rely on fertilizer and diesel shipped through the strait, the conduit for about one-third of global trade in fertilizer and 20 per cent of the world’s export fuels.

Because of a global grains glut, many farmers were already expecting to lose money on this year’s crop. Now the outlook is especially gloomy for farmers who still need to buy spring fertilizer, like Jeff Harrison of Quinte West in Ontario. “We’re in a real bad situation now,” Harrison said.

Prices in the United States, which imports much of its fertilizer needs despite a large domestic industry, rose at the war’s outbreak. Prices for fertilizer jumped from $516 (C$706) per metric ton on Friday to up to $683 (C$934) at the import hub of New Orleans on Thursday. Prices could jump higher if the Persian Gulf closure persists and shipments can’t make it in time for spring planting, analysts told Reuters.

“Literally, this could not happen at a worse time of the year,” said StoneX analyst Josh Linville.

World’s largest single-site urea plant shuts down

Seth Meyer, former U.S. Department of Agriculture chief economist and now at the Food and Agricultural Policy Institute, said farmers might alter crop choices and fertilizer applications due to the price spike.

Farmers need fertilizers for virtually all their crops if they want a good yield, but each crop and the soil they are grown in have different demands.

Farmers could cut back on corn, which requires high rates of nitrogen fertilizer, or else sharply reduce fertilizer application rates, Meyer said.

Shipments from the Middle East are likely to drop not only because transit through the Strait of Hormuz has all but stopped, but also due to cuts in production.

Qatar Energy has had to stop production at the world’s largest single-site urea plant, as it lost its source of natural gas feedstock after the company shut down gas output due to attacks on its LNG facilities.

At the same time, sulfur output has been cut in other parts of the Middle East.

“We have lost a significant chunk of the global supply because of this situation,” Linville of StoneX said.

India buys more than 40 per cent of its urea and phosphatic fertilizers from the Middle East. While imports could be hit, output within India has already been affected.

Three Indian plants have been forced to reduce urea output as LNG supplies from Qatar have dropped sharply, said a New Delhi-based senior industry official. As a result, supply is expected to be tight for urea and diammonium phosphate in the short term, the person said.

Fertilizer market tight before war

The global fertilizer market was already tight, with China restricting exports this year to ensure domestic availability, while producers in Europe have cut output due to the loss of cheap Russian gas supply, analysts said.

Urea prices had risen by around $80 (C$109) per ton from around $470 per ton quoted before the start of the Iran war, they said.

China is likely to expand fertilizer export controls because of the conflict, two agricultural analysts said, although the restrictions may not be formally announced and instead communicated to major producers and customs.

While China sources more than 50 per cent of its sulfur imports from the Middle East, Indonesia relies on the region for nearly 70 per cent of its supplies, traders said. Sulfur is a key ingredient for phosphate fertilizers like diammonium phosphate and monoammonium phosphate.

“It is really hard to find readily available spot cargoes now. There are no spot cargoes anywhere,” said one Chinese sulfur trader.

Australia is dependent on imports to meet most of its fertilizer needs, say industry analysts.

“Another nail in the coffin”

Agricultural economist Corne Louw of GrainSA, which represents South African farmers, told Reuters that fertilizer can make up as much as 50 per cent of their production costs.

“Any increases in the current situation where farmers are already struggling with record low grain prices will just be another nail in the coffin,” he said.

Markets might not yet have fully priced in the possibility of a long war, according to Morningstar analyst Seth Goldstein, who estimates that nitrogen prices could roughly double and phosphate prices rise 50 per cent from current levels.

“If the supply shock lasts more than a few weeks, I wouldn’t be surprised to see prices go back to the highs of 2022, when the Russia-Ukraine conflict began,” Goldstein said.

— Additional reporting by Lewis Jackson, Daphne Zhang and Amy Lv in Beijing, Trixie Yap in Singapore and Rajendra Jadhav in Mumbai, Tristan Veyet in Gdansk, Gus Trompiz in Paris, Wendell Roelf in Johannesburg and Nigel Hunt in London.

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Canadian canola is expected to be shipped between February and April, two traders with direct knowledge of the deals said. Each cargo is of around 65,000 metric tons.

Ten cargoes, or around 650,000 metric tons, represent over 10 per cent of China’s canola imports in 2024 and about 26 per cent of its total imports last year.

“It is easy to get Canadian canola into the Chinese market. Crushers have gone ahead and booked these cargoes,” said one of the sources at an international agricultural company.

The traders asked not to be named because they were not authorised to speak publicly on the issue.

During Carney’s visit to Beijing, China and Canada reached an initial trade deal that would cut tariffs on Chinese electric vehicles in exchange for lower levies on Canadian canola.

Canola, or rapeseed, is crushed to produce cooking oil and other products. The protein-rich meal left behind in the crushing process is used as livestock feed.

China’s canola crushing industry came to a halt

China imposed preliminary anti-dumping duties on Canadian canola in August last year. It then resumed purchases of Australian canola that were halted after it imposed biosecurity curbs that derailed trade in 2020.

State-owned COFCO bought about 500,000 tons of Australian canola in recent months, raising the hopes of Australian farmers that more purchases would follow.

The two Australian cargoes that have reached China have yet to be processed, leaving China’s vast canola crushing industry at a halt for the first time in years.

“We are not sure what is happening to Australian cargoes as the first cargo that arrived in China has yet to be crushed,” said the source.

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As buyers shunned North American supplies amid a trade war, China recorded no imports from the United States for four consecutive months from last September, taking U.S. market share down to 15 per cent from 21 per cent in 2024.

But the 12-million target was met last week after bulk purchases by state stockpiler Sinograin and state trader COFCO, which were the only buyers of U.S. beans, as private crushers continue to favour cheaper supplies from Argentina and Brazil.

WHY IT MATTERS: U.S. soy’s market share in China fell to 15 per cent in 2025, down from 21 per cent the previous year according to Chinese stats.

“Further purchases of U.S. soybeans are unlikely until the next U.S. new crop in September unless prices are competitive with South American soybean prices,” said one of the sources familiar with details of the shipment.

All the sources spoke on condition of anonymity, as they are not authorised to speak to the media.

Sinograin and COFCO did not immediately respond to requests for comment.

China resumed U.S. soybean purchases after the two countries’ leaders met in late October, with the White House saying China had also agreed to buy at least 25 million metric tons annually over the next three years, starting in 2026.

The purchased U.S. soybean cargoes, amounting to 12 million tons, are set for shipment between December and May, the sources said.

In early December, Reuters reported that at least six bulk cargo vessels were scheduled to load soybeans at U.S. Gulf Coast terminals for China, with a seventh already on the way.

One of these vessels, Ocean Harvest, is set to arrive at the eastern port of Zhangjiagang in about a week, according to ship-tracking data from LSEG and Kpler.

Much of the purchased volume is probably destined for state reserves. In recent weeks, Sinograin has held four auctions in an apparent move to free up storage for U.S. soybean shipments.

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The Panamax cargo of about 60,000 metric tons of Canadian canola is the first since China halted imports in October, and is expected to be shipped after March, two traders with direct knowledge of the deal told Reuters on Monday.

WHY IT MATTERS: Steep tariffs on Canadian canola effectively halted exports to China.

On Friday, Carney said Canada expects China to cut tariffs on Canadian canola seed to a combined rate of about 15 per cent by March 1 from 84 per cent currently, part of an initial trade deal that also reduces tariffs on Chinese electric vehicles.

China’s commerce ministry said later that day Beijing would adjust its anti-dumping measures on Canadian rapeseed, without elaborating.

“Lower duty on Canadian canola is almost a done deal after the Canadian PM visit. It makes sense to buy now,” said one oilseed trader at an international trading company.

The Chinese purchase of Canadian canola comes as Australia had been hoping to lift oilseed exports to the world’s largest importer, with state-owned COFCO buying about 500,000 tons of Australian canola in recent months.

China’s purchases of Australian canola resumed after it imposed anti-dumping duties on Canada, the first in about five years, following biosecurity curbs that derailed trade in 2020.

Zhengzhou rapeseed meal futures CRSMcv1 fell 2.4 per cent to a more than one-year low on Monday on hopes of higher supplies.

China’s Canadian canola import collapse

China has been conducting an anti-dumping probe into Canadian canola and in August imposed preliminary duties of 75.8 per cent, effectively halting shipments amid a wider diplomatic and trade dispute between the two countries.

The halt in Canadian shipments has brought China’s vast canola crushing industry to a standstill for the first time since at least 2015, according to data from consultancy MySteel.

Monthly Chinese canola imports fell to zero in October for the first time in two decades, trade data shows, and inventories at crushing plants have fallen to nothing, MySteel said.

Beijing is expected to make a final ruling in its anti-dumping investigation on Canadian canola before March 9.

Canola, or rapeseed, is crushed to produce cooking oil and other products. The protein-rich meal left behind in the crushing process is used as livestock feed.

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The most-active rapeseed meal futures on the Zhengzhou exchange slipped 0.38 per ent to 2,334 yuan (C$464) per metric ton as of 3:41 GMT, extending losses into a third straight session.

WHY IT MATTERS: Traders anticipate Carney’s visit to China could mean movement on the trade battle over electric vehicles, canola and other agricultural goods.

Carney was expected to visit China from January 13 to January 17, his office said on Wednesday, in what would be the first visit by a Canadian prime minister since 2017.

“Carney’s visit fuelled market expectations that Canada could suspend additional tariffs on Chinese goods for a year, potentially prompting China to also pause its 100 per cent tariffs on Canadian rapeseed oil and meal,” said Zhang Deqiang, an analyst at Shandong-based Sublime China Information.

Expectations of increased supply weighed on prices, Zhang added.

China unveiled tariffs in March on more than C$3.6 billion worth of Canadian agricultural and food products, including canola oil and meal, in retaliation for levies imposed by Ottawa in October on Chinese-made electric vehicles and steel and aluminum products.

Beijing imposed preliminary duties of 75.8 per cent on Canadian canola seed imports in August, though a final ruling could result in a different rate or overturn the decision.

Canada, the world’s largest exporter of canola, shipped nearly C$5 billion worth of canola products to China in 2024, about 80 per cent of which were seeds. The steep duties on canola seed, if they remain in place, would probably all but end those imports.

Canola, or rapeseed, is crushed to produce cooking oil and other products. The meal left behind in the crushing process is used as livestock feed.

“A recent rally alongside soybean meal last week has also prompted a pullback in rapeseed meal prices this week,” said Rosa Wang, an analyst at Shanghai-based agroconsultancy JCI.

— Reporting by Ella Cao in Beijing and Naveen Thukral in Singapore

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The cargoes, totalling around 600,000 metric tons, are for shipment between March and May, with overall U.S. soybean purchases now approaching 10 million tons, the traders said.

That represents over 80 per cent of the 12 million metric tons that U.S. Treasury Secretary Scott Bessent said China pledged to buy by the end of February.

“There were more U.S. cargoes bought by Sinograin and total purchases are very close to 10 million tons,” said one of the traders with direct knowledge of the deals. “We think China will buy couple of million tons more to meet the target.”

Market ended 2025 on positive note

China’s buying has underpinned Chicago soybean futures in recent weeks, helping the market end 2025 on a positive note, as the resumption of imports from the United States following a thaw in Beijing–Washington relations has erased most of the losses incurred during the trade war.

Chicago soybeans were trading up 0.1 per cent at $10.62 a bushel as of 11:40 GMT on Tuesday.

Beijing has stepped up U.S. soybean purchases despite a domestic supply glut driven by record South American arrivals and weak demand.

In December, Sinograin held three public auctions to make room for U.S. shipments amid ample domestic supplies.

However, average prices and clearance rates fell in successive rounds, with only one-third of soybeans sold in the final auction, Reuters previously reported.

Traders had expected Sinograin to sell around 4 million metric tons in the auctions.

— Reporting by Ella Cao in Beijing, Naveen Thukral in Singapore and Gus Trompiz in Paris

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As the two nations battle over trade tariffs, the lack of Chinese buying has cost U.S. farmers billions of dollars in lost sales.

Although COFCO’s deal for December-January shipment of about 180,000 metric tons of soybeans was China’s first such buy in months, traders do not expect a significant resumption in demand for U.S. cargoes after recent large South American purchases.

COFCO did not immediately respond to a Reuters request for comment.

“COFCO has proceeded to purchase U.S. beans even before the two leaders have reached a trade agreement,” said a trader at an international trading company that supplies Chinese crushers.

“The volumes booked by COFCO are not that large, three cargoes for now.”

Benchmark Chicago soybean futures prices Sv1 jumped this week to their highest in 15 months, rebounding from recent five-year lows on hopes for a U.S.-China trade deal.

The prime U.S. soybean export season normally runs from October through January, but China has shunned soybeans from the autumn U.S. harvest this year, amid protracted trade friction with Washington, turning instead to South American suppliers.

Reuters was the first to report China’s purchase of three cargoes.

Lacklustre demand

China, which takes more than 60 per cent of world soybean imports, has nearly completed booking cargoes from Brazil and Argentina through November, with limited purchases expected for December and January ahead of the Brazilian harvest.

“U.S. suppliers have missed out on most of oilseed crushing business,” said a second oilseed trader, who expected China to need about 5 million tons of shipments in December and January, for which market conditions favour Brazil.

U.S. soybeans, which traded at a steep discount to Brazilian cargoes in recent weeks due to subdued Chinese demand, have strengthened this week and are now priced at parity at about $2.45 per bushel above Chicago futures, traders said.

Private Chinese buyers tend to prefer Brazilian soybeans for their higher protein content, which typically brings a premium over U.S. soybeans, said Jeffrey Xu, general manager of Shanghai-based OCI, a soybean consultant and two other traders.

Still, China could take about 8 million tons of U.S. soybeans for its strategic reserves in the period from December to May, traders said, buying through state-owned enterprises such as Sinograin, which would be worth roughly $4 billion.

— Additional reporting by Karl Plume in Chicago

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China still needs to purchase about 8–9 million metric tons of soybeans for December-January shipment after covering cargoes through November with hefty purchases of Argentine beans in recent weeks, the sources said. Escalating Washington-Beijing trade tensions continue to shut out U.S. supplies.

“China is not buying U.S. beans because of the trade war and Brazilian beans are too expensive,” said one oilseed trader at an international trading company which supplies agricultural products to China.

“China might end up using its own reserves for the year-end and early next year, before the new South American harvest comes in.” he said.

Brazilian soybean premiums

Brazilian soybean premiums are holding at $2.8-2.9 per bushel (C$3.93 to $4.07) over the November Chicago soybean contract SX25 compared with U.S. premiums at around $1.7 per bushel.

Crush margins have been in negative territory for most of the second half of the year.

Crushers have little motivation to secure December-January soybean cargoes as supplies from Brazil have squeezed their margins, said a Shanghai-based trader.

Chinese buyers are hoping that an early and record soybean harvest in Brazil in early 2026 will help ease prices.

Brazilian farmers are expected to harvest a record 177.64 million metric tons of soybeans in the 2025/26 season, around 6 million tons more than the previous year, crop agency Conab said.

“We think new crop shipments from Brazil can start at end of January,” said a second oilseed trader. Sources declined to be named as they were not authorised to speak to media.

U.S.-China soybean talks

Chinese buyers have also not yet entirely written off U.S. supplies, with oilseed processors likely to make purchases for December-January if there is a trade agreement between the two governments, traders and analysts said.

“If a deal goes through, Chinese buyers will likely turn to U.S. beans for the two-month window, with prices more attractive than South American offers,” said Johnny Xiang, founder of Beijing-based AgRadar Consulting.

Soybeans are expected to feature on the agenda for a potential meeting between U.S. President Donald Trump and Chinese President Xi Jinping in South Korea. Beijing has, however, yet to publicly confirm the talks.

On Tuesday, Trump accused China of “purposefully” avoiding U.S. soybean purchases, calling it an “economically hostile act” that has “caused difficulties” for American soybean farmers.

Since the first Trump administration, China has diversified its soybean imports. In 2024, China bought roughly 20 per cent of its soybeans from the U.S., down from 41 per cent in 2016, customs data shows.

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The purchases amount to around 540,000 tonnes, equivalent to about eight per cent of China’s total canola imports last year.

Beijing is conducting an anti-dumping probe into Canadian canola, and in August imposed preliminary duties of 75.8 per cent, bringing shipments to a virtual standstill amid a larger diplomatic and trade dispute between the two nations.

Canada had been China’s main supplier for the past several years, and the cargoes demonstrate China can find alternate sources of the oilseed as trade talks between Ottawa and Beijing drag on. Australia is a smaller producer than Canada, however, and may struggle to match the Canadian volumes.

All shipments are scheduled to load between November and January, said an Australia-based broker for agricultural products with direct knowledge of the deals. The nine cargoes include one that was reported by Reuters last month.

“It has been a typical buying operation by a Chinese company,” said the Australia-based broker. “They just went in quietly and bought nine cargoes from several major trading companies in Australia.”

COFCO did not immediately respond to a request for comment.

Australia had been frozen out of the Chinese market by biosecurity rules to prevent the spread of a fungal plant disease since 2020, but Reuters reported in July that Canberra was close to an agreement with Beijing that would allow for five trial cargoes.

Canola, or rapeseed, is crushed to produce cooking oil and other products. The meal left behind in the crushing process is used as livestock feed.

China is the world’s biggest canola importer, taking in 6.4 million tonnes worth US$3.4 billion last year, almost all of it from Canada, according to Chinese customs data.

Canada is the world’s biggest exporter of canola and Australia is the second-biggest.

Earlier this month, China extended its investigation into Canadian canola imports to March 9, 2026, buying six more months for negotiations. A final ruling could maintain the duty rate, change it or remove it.

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