①The conflict involving the US, Israel, and Iran has triggered a shock to the global flow of commodities, leading to a surge in natural gas prices and tightening fertilizer supplies, placing pressure on farmers worldwide; ②In the worst-case scenario, this means reduced yields or even crop failures in the next season; in the best-case scenario, higher input costs will also be reflected in food prices next year.
Economists have recently warned that the current conflict among the US, Israel, and Iran has caused one of the fastest and most severe shocks to the global flow of commodities in recent years, resulting in soaring natural gas prices and tightening fertilizer supplies, with farmers around the world facing increasing pressure.
Among these challenges, the fertilizer shortage is further threatening the livelihoods of farmers in developing countries, regions already impacted by rising temperatures and climate anomalies, and may lead to an increase in global food prices.
Karl Skau, Deputy Executive Director of the United Nations World Food Programme, stated that the poorest farmers in the Northern Hemisphere heavily rely on fertilizer imports from the Gulf region, and the current shortage coincides with the start of the planting season.
He pointed out: "In the worst-case scenario, this means reduced yields or even crop failures in the next season; in the best-case scenario, higher input costs will also be reflected in food prices next year."
Maximo Torero, Chief Economist of the United Nations Food and Agriculture Organization, noted that the Strait of Hormuz is a critical channel for the transport of global energy and fertilizers, carrying about 20 million barrels of oil per day, accounting for approximately 35% of global crude oil transportation. It also handles significant volumes of liquefied natural gas and fertilizer trade, with sulfur from the Gulf region being a key raw material for phosphate fertilizer production. The impact of shipping disruptions has quickly spread to the global food and agricultural systems.
Torero stated that current shipping risks are driving up agricultural input costs: wartime insurance rates in the Gulf waters have risen from 0.25% to as high as 10%, reassessed every seven days; urea prices have surged significantly, and farmers in multiple countries are facing dual pressures of rising fertilizer and fuel costs.
Key fertilizer supply disruptions
Currently, the supplies of two key fertilizers, nitrogen and phosphate, are under direct threat. Among them, nitrogen fertilizer supply (including urea) has been the most severely affected. Urea is the most widely traded fertilizer globally, promoting crop growth and boosting yields.
Chris Lawson, an analyst at the London-based commodity consultancy CRU Group, stated that this conflict has impacted approximately 30% of global urea trade.
Severe shortages have already emerged in some countries. Raj Patel, a food systems economist at the University of Texas, pointed out that, for instance, over 90% of Ethiopia’s nitrogen fertilizers are imported from the Gulf region via Djibouti, and this supply chain was already strained before the war broke out. 'It is now the planting season, but fertilizers have not arrived.'
Meanwhile, the supply of phosphate fertilizers, which support crop root development, is also under pressure. Saudi Arabia produces about one-fifth of the world’s phosphate fertilizers; the region also exports more than 40% of the world's sulfur, a key raw material and byproduct of oil and gas refining.
Owen Goode, an analyst at Argus Consulting, stated that even if the war ends, producers in the Gulf region will need clear security guarantees before resuming shipments through the strait, and transportation insurance costs will almost certainly rise.
In India, the government has prioritized ensuring domestic urea supplies and provided fertilizer companies with approximately 70% of their natural gas needs. However, some plants are still operating at low capacity, leading to reduced output.
Hannah Opsal-Ben Amar of Yara International, a global fertilizer giant based in Norway, stated, 'The global food system was already fragile, and its smooth operation relies on a stable fertilizer supply chain to ensure farmers can produce the food the world needs.'
Critical time window impacted
Fertilizers are typically applied before or during planting. Once supply is delayed, even if replenished later, the critical early growth stages of crops will be missed, thereby affecting yields.
This impact is already evident in the United States and Europe, where the main planting season is currently underway, and is expected to affect the first planting season across much of Asia in the coming months.
Analysts noted that prior to the release of the U.S. government’s report (Annual Planting Intentions Report) on Tuesday, the Middle East conflict had already disrupted American farmers' planting plans, resulting in reduced corn acreage and the lowest spring wheat planting levels since 1970.
Meanwhile, soybean planting acreage is expected to surge significantly as some growers shift land from corn and wheat, which require more expensive fertilizers, to soybeans.
Despite U.S. government subsidies reaching near-record levels, net farm income in the United States is projected to decline this year, marking the fourth consecutive year of tightening profit margins, high production costs, and low agricultural commodity prices for growers.
Joseph Glauber, an expert at the International Food Policy Research Institute, pointed out that although fertilizer prices are currently lower than their peak following the Russia-Ukraine conflict, grain prices were higher at that time, allowing farmers to absorb the costs. However, with current low grain prices and shrinking profit margins, farmers may be forced to switch to crops that are less fertilizer-intensive (such as soybeans in the United States) or reduce fertilizer use, thereby lowering yields. Ultimately, reduced production will drive up food prices for consumers.
Editor/Doris