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Farmers are being told to count on volatility until diesel prices return to normal — hopefully hastened by a ceasefire agreement by the United States and Iran.
The Trump administration has assured the peace deal will reopen the shipping route through the Strait of Hormuz.
But it is unclear when oil supplies will return to full flow and settlement points such as Iran’s nuclear programme are fully resolved.
The high diesel price and peace talks were raised often during a fuel horizons panel between Farmlands chief executive Tanya Houghton, Fern Energy chief executive Chris Gourley and Horizon Lab managing director Tim Ewing-Jarvie at Fieldays at Mystery Creek.
The panel talk was held before the deal and oil prices starting to fall.
Experts predict months will follow before oil and gas supplies return to normal.
Mrs Houghton said inflationary pressure was coming on to farms in just about every category as a result of fuel volatility.
The co-op had tried to minimise that and was looking at investing in additional local stock as farmers headed into spring, she said.
"There is no doubt that the situation . . . is causing impact through our entire supply chain."
Farmlands was adapting to the volatility by carrying out scenario planning and budgeting for different scenarios on fuel, prices and availability.
Farmers should have their fuel needs for spring locked in now, she said.
They should have solar panels on every cow shed as an alternative to other energy sources.
"I was recently on a Farmlands Flex installation in the Waikato and they can do 1.5 milkings off their battery, so being able to have that resiliency is the key."
Since being launched a year ago, the Farmlands Flex joint venture would have carried out 100 to 110 installations by the end of the month as farmers had quickly understood solar economics, she said.
After the panel session, Mrs Houghton said that was expected to more than double in the next year or two, as there had been increasing demand and general adoption of the technology.
"Our ideal is to get to 10,000 farms, generating a minimum of 100kW which actually make us the equivalent of a farm power station spread all around the country."
Solar panels combined with batteries and the right platform to manage generated energy had large growth potential, she said.
Fern Energy supplies 35% of fuel to the rural market, half owned by Farmlands after a 2022 merger with Northfuels/Southfuels.
Mr Gourley said farmers should hold budgets, based on volatility.
Diesel prices initially spiked because of the cost of crude oil and went beyond petrol prices for the first time in his lifetime, he said.
A higher refining cost than the price of crude had only softened lately.
"Will it get back to $2 in the short term? I would hate to be the one guessing that as I think there is too much volatility."
Farmers should be thinking about energy resilience plans such as having a good supply of fuel, buying early and putting solar energy on farms, as those events were more regular, Mr Gourley said.
Mr Ewing-Jarvie provides advice to companies on global risk, disruption and future scenarios.
Leading up to the US and Iran deal, he and his team were working on four base cases and the best-case scenario would be a durable deal worked out between the US and Iran with Israel party to the agreement.
"At the moment [mid-June], I would put that at a 10% to 15% probability band. Your worst case is you do return to a full regional escalation which would keep the strait shut and production shut-ins going on for longer and I probably would put that in the same category of maybe 10% to 15%."
A fragile deal was the most likely scenario to play out, he said.
"Think about that as like a frozen conflict so the underlying tensions aren’t really resolved, but it gives you the space to negotiate something more like a comprehensive deal."
A hybrid case with a 25% to 30% probability would see some result before a return to conflict.
A peace deal had taken so long because the "hard ball actors" were at odds with ranking negotiation points such as the strait opening, a disarmament of the Iranian weapons programme, reparations and the lifting of sanctions.
About 600,000 barrels a day was coming through the Atlantic Basin but prices were still linked to supply, with the International Energy Agency warning of a deficit of 6 million barrels for the year.
Many Iranian rigs which had shut down would take time to get back on line.
A delay of months or even years could follow to repair energy infrastructure, return shipping confidence and reduce insurance premiums, even in a back-to-business scenario, Mr Ewing-Jarvie said.
World markets were adapting with the rise of small portable nuclear reactors and plutonium discoveries, he said.
