The war between the United States and Iran has affected the wheat harvest in Australia, a major global wheat exporter. Fertilizer prices have surged, and dry weather has persisted for months.

On the 2nd (local time), the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said in its quarterly crop report that wheat production to be harvested in Australia at the end of this year will be 26.7 million tons, down 26% (about 9 million tons) from last year.

ABARES pointed to the U.S.-Iran war as the backdrop for this outlook. Australia has mainly imported fertilizer used in wheat farming via the Strait of Hormuz, but the closure of the strait due to the war has disrupted supply. The agency noted that higher fertilizer prices could lead farms to reduce application rates and lower yields, adding that “if the war continues, the cost of production inputs could remain high for an extended period, putting a burden on agricultural production.”

Weather also played a role. Some areas, including New South Wales and southern Queensland, have experienced severe drought in recent months.

According to the report, Australia is expected to plant 10.9 million hectares of wheat this year, a 12% decrease from last year. This would be the lowest level since 2019. ABARES noted that “sufficient fertilizer supply and rainfall at the right time will be very important to achieve the current yield outlook.”

Australia is one of the largest wheat exporters in the world. Australian wheat is exported to Southeast Asia, the Middle East, China, and other regions around the globe. A decline in the Australian harvest could contribute to higher international grain prices.