RBNZ Warns of Higher Food Prices as Fertiliser Costs Soar

The Reserve Bank of New Zealand (RBNZ) has warned that rising fertiliser costs will lead to higher food prices in the country. Hayley Gourley, an RBNZ monetary policy committee member and small Canterbury herb-seed farm owner, expressed concern about the impact of high oil prices on fertiliser production.

The global urea price shock, which occurred in late February and early March 2026, has led to a significant increase in fertiliser costs. Urea is made from natural gas and is a key component in fertiliser production. The conflict in the Middle East has disrupted oil and gas supplies, causing prices to rise.

The RBNZ estimates that it may take up to nine months for higher fertiliser prices to fully pass through to supermarket shelves. This means that the full impact of the price shock will be felt in October and November 2026. The Bank's governor, Dr Anna Breman, warned in March 2026 that higher petrol and diesel prices, which make up about 4% of the Consumer Price Index (CPI), would lead to higher headline inflation.

The fertiliser cost shock has been exacerbated by the fact that many farmers are unable to defer nitrogen application until spring, when planting demand is high. This means that they will have to absorb the increased costs or pass them on to consumers through higher prices.