Who owns the risk when supply chains come under pressure?
The disruption in the Strait of Hormuz earlier this year created understandable concern across global fertiliser markets. Around a third of globally traded urea normally moves through that shipping corridor, alongside a significant share of the world's traded sulphur. For countries whose food production depends on imported fertiliser, events in the Middle East quickly became a question of agricultural and economic resilience.
New Zealand is heavily exposed to those international supply chains. Our agricultural and horticultural sectors rely on a steady supply of nutrients sourced from around the world and, as a geographically remote nation, we sit a long way from many of the major production hubs. Yet while prices became volatile, supply to New Zealand farmers remained relatively secure. Across the Tasman, Australia faced a different set of challenges.
The Australian Government established a Fertiliser Supply Working Group, streamlined biosecurity processes and introduced a Fuel and Fertiliser Security Facility to help secure additional imports as supply through the Strait came under pressure. Australia is currently wholly reliant on imported urea, with a significant proportion of that supply ordinarily travelling through the Strait of Hormuz. The disruption brought questions of fertiliser supply security to the forefront of the national conversation.
You’ve no doubt heard New Zealand’s economic story explained through a No. 8 wire lens: distance, scarcity and limited scale forced us to be resourceful, and resourcefulness became innovation. It’s a story we’ve become good at telling, particularly when positioning New Zealand businesses internationally. But there is another response to many of those same constraints that features far less often in our national story. New Zealanders also cooperated.
Farmers and businesses pooled capital, shared infrastructure, built processing and distribution networks, and created scale they could not achieve individually. Some of our largest and most enduring businesses grew from that ethos. It raises an interesting question: could the way we chose to structure and own some of our most important businesses also be one of New Zealand’s competitive advantages?
A recent research piece commissioned by the Business Council of Co-operatives and Mutuals (BCCM) examined Australia's fertiliser supply through exactly that lens of ownership. It traced the history of farmer cooperatives in the Australian fertiliser industry, their subsequent corporatisation, mergers or acquisitions, and Australia's growing reliance on imported fertiliser.
As CEO of Cooperative Business New Zealand, that comparison caught my attention because New Zealand has retained something Australia largely has not: two major farmer-owned fertiliser cooperatives. Ballance Agri-Nutrients and Ravensdown have taken similar approaches to managing supply risk, and there is a common thread running through both strategies: investment in supply security over the long term.
Over the past 50 years, farmer ownership of the two cooperatives has funded a nationwide network of more than 90 storage facilities, capable of holding up to 25% of New Zealand’s annual fertiliser requirements during peak season. This long-term investment provides supply-chain resilience that private companies would struggle to replicate, ensuring farmers have access to product when they need it most. Both cooperatives are strengthening supply resilience through domestic manufacturing, diversified international sourcing, forward planning and increased inventory ahead of spring to protect supply during a period of extraordinary market volatility.
The comparison raises a broader question about the role ownership plays in national economic resilience.
Farmer-owned cooperatives still must be commercially disciplined (and this theme comes up many times in our Co-op Leader Conversations podcasts, check them out here). They need to generate returns, invest wisely, and remain competitive. But they are making those decisions on behalf of the same farmers and growers who ultimately bear the consequences if fertiliser is unavailable at the point it is needed most.
That can influence how risk is evaluated. Maintaining manufacturing capability, securing shipping capacity, building supplier relationships over decades or holding additional inventory all carry costs. The way those costs are weighed against longer-term supply risk may look different when the customers relying on that supply are also the owners of the business.
That becomes particularly interesting when we look back at Australia's experience, and it leaves New Zealand with a useful counterfactual:
If our fertiliser cooperatives had followed the same path 20 or 30 years ago, would our supply chain look the same today?
There is no simple answer. Geography, infrastructure, international relationships and decades of investment all contribute to resilience. Ownership is one part of that picture, but it is a part we perhaps don’t examine often enough. The structure of a business can influence which risks it focuses on, how it chooses to manage them and the commercial imperatives that sit behind those decisions.
For a small, geographically remote country whose prosperity is for a large part directly connected to primary production, there is a wider policy question here too. When we think about nationally important infrastructure and economic resilience, should we pay more attention to who owns the businesses that provide it, and how that ownership influences the way risk is managed and commercial decisions are made over the long term?
Read more articles
