Australian Farmers Cut Wheat Planting Amid Rising Costs and Dry Weather

A disturbing report from Reuters's Peter Hobson about how Australia's farmers, hit by increased costs from the Iran war and dry weather, are growing less wheat.

Here are the top lines:

Australia may harvest up to 40% less wheat

Global supply set to tighten

Iran war raises fuel and fertiliser costs

El Niño threatens dry conditions

Fertiliser shortage sows fears for 2027 crop

Justin Everitt of Brocklesby is planting 50% less wheat this year than he thought he would.

Standing in muddy brown boots and jeans by his tractor and 11-metre-wide seeding rig in a bare field, the 44-year-old said a lack of rainfall and rapid increases in fuel and fertiliser prices due to the war in Iran had ripped up his sowing plans.

He is one of thousands of farmers across Australia deciding to plant less wheat and spread less fertiliser.

Their choices — and the likelihood of a dry growing season for many — mean Australia, the third-largest wheat exporting nation, may have as much as 10 million tons less to ship in the upcoming season, an amount equivalent to 5% of annual global exports.

Everitt, whose family has farmed near Brocklesby, 300 kilometres north-east of Melbourne, for six generations, said he had never before made such radical changes to his cropping plans.

"Every indicator is pointing towards lower production," he said.

A smaller harvest in Australia would reduce global wheat supply and put upward pressure on prices, which have already begun to rise.

Australia is the first major grain exporter to plant wheat since the beginning of the Iran war, which throttled exports of fuel and fertiliser from gulf nations. Other countries are also likely to grow less, shrinking the food supply further.

Reuters interviewed 18 farmers across Australia. In the driest areas, most were sharply scaling back planting. Nationwide, many were switching from wheat to crops like barley or canola that either need less fertiliser or sell for a higher price.

Forty kilometres west of Everitt's farm, near the town of Corowa, Anthony Black said he would sow 20% less wheat and use one-third less fertiliser than he planned. With dry conditions, he expects to harvest around 40% less wheat.

There isn't money in his budget to absorb a doubling in the price of urea, a key nitrogen fertiliser, he said. "It's just not there."

Wheat supply pressure

Six agricultural analysts said the amount of Australian land planted with wheat would fall by between 7% and 20% from last year, potentially removing the grain from an area nearly the size of Belgium.

The harvest, due towards year-end, could be between 16% and 41% smaller, the analysts estimated, shrinking from last year's roughly 36 million tons to as low as 21.3 million tons, if the most pessimistic estimate proves correct and dry conditions extend their grip.

The global wheat market will likely shift from surplus into deficit, drawing down stockpiles and pushing up prices, said an analyst at an international grain trading firm who did not have permission to speak publicly. Production of other crops will also fall, he said.

Weather not helping

Cropping regions in much of New South Wales and Queensland have had very little rain, and many farmers who would usually sow into dry soil and wait for rainfall are not, because of a grim weather outlook and high costs.

Forecasters predict the formation of an El Niño, a weather phenomenon that typically heats and dries Australia's east coast.

Australia's Bureau of Meteorology expects below-median rainfall for most of the country's cropping zones between June and September.

Planting was just too risky, said one New South Wales grower who did not stock up on fuel or fertiliser before prices rose and had left their entire farm unsown.

Other regions are better off, however. Tim McClelland, who farms near Birchip in Victoria state, said good rainfall had given him the best start to a season he'd ever had.

He has bought all the fertiliser he'll need. "I feel a bit sick about the amount of money it cost," he said. "But positive about the season."

Fertiliser import issue

Australia typically imports more than half its nitrogen fertilisers from the Middle East, but supply has been choked by the closure of the Strait of Hormuz.

The country still has 600,000 tons — roughly 20% — less urea than it uses in a typical year, said Hamish McIntyre, president of the National Farmers' Federation. Supply chain disruption also means fertiliser could often arrive later than farmers need it, reducing its effect, he said.

In Corowa, farm machinery salesman Joe Gorman said his phone had stopped ringing.

In his office beside a row of shining red tractors on the road out of town, he said the economic chill would spread.

"When the farmers feel the pinch, there's less blokes at the pub after work," he said. "There's less blokes at the bakery on a Saturday. The supermarkets feel the pinch, the footy clubs feel the pinch. It's a flow-on effect."

As evening fell in Brocklesby, Everitt was sowing vetch and barley — fodder crops he won't harvest but will allow his sheep to eat — and using only a half-measure of fertiliser.

Such half-measures save money but are a short-term fix. Next year, Everitt and many others will have to over-fertilise to restore their soil, which will be difficult if prices remain high.

The 2027 season scares him, he said. "We'll be drawing down on a lot of soil nutrients this year and we'll have to put them back in next year. If we can't do that, I dare say next year there could be a lot of crop not go in."

I'm going to get some help because I'm not there at the moment, and haven't been since a chilly visit in January 2020, just before COVID swept the world.

Here's Reuters take on the overnight news.

Major stock indexes mostly eased as technology shares fell on Monday, while oil prices climbed following continued worries over supply disruption from the Iran war.

Longer-dated US Treasury yields were nearly flat after climbing to their highest level in over a year in overnight trading.

Sovereign bond yields have risen sharply recently as investors worry the war in Iran that began in late February may bring a lasting inflationary shock.

President Donald Trump posted on social media on Monday that he was holding off on a planned military attack on Iran scheduled for Tuesday, while efforts continue to reach a deal. He added that the United States was ready to resume attacking if one is not reached.

US crude rose $3.24 to settle at $108.66 a barrel, while Brent crude gained $2.84 to $112.10.

Investors are also focused on the tech sector's recent sharp gains and are bracing for results from Nvidia this week.

Technology down 1%, led sector declines in the S & P 500, while an index of semiconductors was down 2.5%. Energy led sector gainers and was last up 1.8%.

Trump's recent trip to China "left a lot of open questions about the future of Taiwan and whether or not the United States would be there to protect it," said Oliver Pursche, senior vice president, advisor for Wealthspire Advisors in Westport, Connecticut.

"Given Taiwan's significance to the chip market, that partially explains the selloff we're seeing in that sector today," he said, adding that investors are also taking profits.

Trump's first visit to Beijing since 2017 ended on Friday with no major breakthroughs on trade or tangible help from Beijing to end the US-Israeli war on Iran.

The Dow Jones Industrial Average rose 159.95 points, or 0.32%, to 49,686.12, the S & P 500 fell 5.45 points, or 0.07%, to 7,403.05 and the Nasdaq Composite fell 134.41 points, or 0.51%, to 26,090.73.

MSCI's gauge of stocks across the globe fell 0.24 points, or 0.02%, to 1,098.76. The pan-European STOXX 600 index rose 0.54%.

Rising yields push up borrowing costs and mean a higher discount for future company earnings, challenging stock valuations.

The yield on the benchmark 10-year Treasury note climbed to 4.659% in overnight trading, its highest level since February 2025. It has since retraced its gains and was last flat on the day at 4.591%.

Earlier, Japan's 10-year yield hit a peak not seen since 1996 as the government proposed to issue fresh debt to fund a planned extra budget to cushion the economic blow from the Iran war. Germany's 10-year bond yield rose to a level not seen in 15 years.

AI, retail earnings to test stocks' recent rally

The artificial intelligence trade will be tested by earnings from Nvidia that are due on Wednesday, with expectations sky-high for the world's most valuable company.

Nvidia shares are up sharply since a March low, while the Philadelphia SE semiconductor index has also surged amid demand for chips as tech companies spend massively to build AI-related infrastructure.

Also due this week are results from a host of retailers, including Walmart, which will provide an insight into how consumers are faring with high energy prices.