Prices of key agricultural inputs have soared since the intensification of the conflict between Iran, the US and Israel
As the dispute between Iran, the United States and Israel reaches its 11th day, disruptions in the strategic Strait of Hormuz are driving a sharp rise in global fertilizer prices and raising the risk of a new food crisis.
Prices of relevant agricultural inputs have risen since the intensification of the conflict. At the Chicago Board of Trade, urea futures contracts – a market reference – reached US$584.5 per ton on March 9, an increase of 25% compared to February 28. In China, the spot price of sulfur reached 4,550 yuan (US$659) per ton on the same day, an increase of 17% in the same period.
“Fertilizer is the ‘food of food’ and a pillar of modern agriculture”said Cheng Guoqiang, director of the National Food Security Strategy Research Institute. In an interview with Caixinhe stated that the near paralysis in the strait is already severely affecting the global fertilizer chain, with shortages of relevant products such as urea, phosphate fertilizers and sulfur.
The Strait of Hormuz is a strategic route through which 1/3 of the world’s maritime fertilizer trade passes. The Gulf region accounts for 45% to 49% of global urea exports, 20% to 30% of phosphate fertilizers and 45% to 50% of sulfur shipments. Data from the IFA (International Fertilizer Association) and TFI (The Fertilizer Institute) indicate that a prolonged lockdown could open up an annual deficit of 50 million to 60 million tonnes in global supply.
The interruption comes at a sensitive time for spring planting in the Northern Hemisphere, and there are no strategic stocks of fertilizers capable of cushioning the impact. Cheng said shortages could reduce productivity of staple crops by 2% to 5%.
According to him, the conflict could trigger a new global food crisis, possibly broader and more severe than the turbulence recorded after Russia’s invasion of Ukraine in 2022.
“The Strait of Hormuz represents a physical blockade that is difficult to overcome”declared Cheng. He said the interruption affects nitrogen fertilizers – the most important for crop growth – precisely during the crucial spring planting period. In the 2022 crisis, the main impact was concentrated on potash, and Russian fertilizer exports were largely outside the sanctions and could be redirected.
Cheng stated that the crisis can develop in 3 stages. The current phase, until April 2026, involves a price shock that could lead farmers to reduce fertilizer use. The 2nd stage, from May to July, can change planting decisions and directly affect autumn harvests. If the interruptions advance to a 3rd phase from August onwards, the depletion of nutrients in the soil could compromise several harvests, increasing the risk of a more prolonged global food crisis.
The IFPRI (International Food Policy Research Institute) estimates that a prolonged conflict could raise global food prices by 10% to 30%, above the 10% to 20% increase recorded in 2022, and push an additional 120 million to 250 million people into famine.
The global capacity to absorb the impact is limited. There are no strategic fertilizer reserves. There are potential alternative suppliers, such as Russia and China, but both face restrictions. Russia, responsible for 15% to 20% of global trade in the product, still suffers from sanctions and instability in the Black Sea. China, the 2nd largest exporter, tends to prioritize internal food security.
The effects will not be uniform. Large importers, such as India and Brazil, face immediate risks. India, the largest consumer of urea in the world, imports more than 80% of the product from the Middle East. Brazil, the main soybean exporter, buys around 40% of the urea used in the country in this region, which puts pressure on agricultural costs and could affect export volumes – also having repercussions for large buyers such as China.
Even producing countries are already feeling impacts. Iran and suspended part of urea production.
The most vulnerable regions include sub-Saharan Africa, where fertilizer use is already the lowest in the world. The WFP (World Food Program) has warned that tens of millions of additional people in the region could face hunger.
The Gulf countries themselves, with food self-sufficiency rates of less than 20%, may also face shortages when their emergency stocks – estimated to last 3 to 6 months – are exhausted. In a sign of growing concern, Iran banned all exports of food and agricultural products on March 3. Kuwait adopted a similar measure on March 5, with a 1-month ban on food exports to protect the domestic market.
