Iran Conflict Disrupts Global Fertilizer Supply, Threatens Higher Food Costs

Agricultural producers worldwide face mounting pressure as Iran's restrictions on shipping through the Strait of Hormuz create severe fertilizer shortages. The disruption affects critical nutrients like nitrogen and phosphate just as planting season begins, potentially leading to reduced crop yields and higher food prices globally.

Agricultural producers across the globe are confronting mounting challenges as the ongoing conflict involving Iran disrupts critical supply chains. Energy costs have surged while fertilizer availability has diminished significantly following Tehran’s substantial restrictions on traffic through the Strait of Hormuz, implemented as a response to military strikes by the United States and Israel.

This fertilizer crisis threatens to compound existing hardships for agricultural producers in developing nations, who already face challenges from climate change and unpredictable weather patterns, potentially resulting in increased food costs for consumers worldwide.

Agricultural producers in the Northern Hemisphere who depend heavily on fertilizer imports from Gulf region suppliers are particularly vulnerable as the growing season commences, according to Carl Skau, deputy executive director of the World Food Program.

“In the worst case, this means lower yields and crop failures next season. In the best case, higher input costs will be included in food prices next year,” Skau explained.

In Punjab, India, rice producer Baldev Singh, age 55, expressed concern that small-scale agricultural operations — which represent the majority of the nation’s farming operations — face an uncertain future without government fertilizer subsidies when demand reaches its peak in June.

“Right now, we are waiting and hoping,” Singh stated.

Tehran has significantly curtailed commercial traffic through the Strait of Hormuz, a crucial waterway that typically facilitates approximately one-fifth of global petroleum shipments and nearly one-third of worldwide fertilizer commerce.

Essential plant nutrients nitrogen and phosphate face immediate supply disruptions due to the maritime blockade.

Nitrogen-based products, including urea — the most commonly traded fertilizer that promotes plant development and increases crop production — experience the most severe impact from transportation delays and escalating liquefied natural gas costs, which serve as a crucial component in production.

The regional conflict has affected roughly 30% of international urea commerce, according to Chris Lawson from CRU Group, a commodities consulting firm based in London.

Several nations already confront severe supply shortages, reports Raj Patel, a food systems economist from the University of Texas. Ethiopia, for instance, obtains more than 90% of its nitrogen fertilizer from Gulf suppliers via Djibouti, a supply chain that experienced strain even before hostilities commenced in February.

“The planting season is now,” Patel observed. “The fertilizer isn’t there.”

Phosphate availability, which supports plant root systems, also faces constraints. Saudi Arabia manufactures approximately one-fifth of global phosphate fertilizer, while the region exports more than 40% of the world’s sulfur — a vital component and byproduct of petroleum and gas processing, Lawson noted.

Following the conclusion of hostilities, Gulf region producers would require substantial security assurances before resuming normal shipping operations through the strait, with insurance expenses likely to increase significantly, said Owen Gooch, an analyst with London-based Argus Consulting Services.

India’s government has made domestic urea supplies a priority and provides fertilizer manufacturers with approximately 70% of their natural gas requirements. However, some facilities continue operating below full capacity, resulting in reduced production.

“The food system is fragile, and it depends on stable fertilizer supply chains to ensure farmers can produce the food the world relies on,” stated Hanna Opsahl-Ben Ammar from Yara International, a major global fertilizer manufacturer.

Agricultural producers typically apply fertilizers immediately before or during planting, meaning crops lose crucial early development opportunities and production can decline when deliveries experience delays, regardless of later supply improvements.

The consequences are already apparent in the United States and Europe during their primary planting period, with similar effects anticipated across much of Asia in upcoming months.

“Our crops out in the field need nitrogen now — the sooner the better — so they can get off to a good start, helping them establish themselves and build up reserves for the harvest later this summer,” explained Dirk Peters, an agricultural engineer operating a farm near Berlin.

While fertilizer costs remain below the highs experienced following Russia’s Ukraine invasion, grain prices were elevated then, enabling producers to manage expenses, said Joseph Glauber from the International Food Policy Research Institute. Current lower grain prices mean reduced profit margins, potentially forcing producers to select crops requiring less fertilizer — such as soybeans in America — or reduce fertilizer applications, decreasing yields. Reduced production can result in higher consumer costs.

Alternative suppliers are unlikely to compensate for the deficit. China, the world’s leading nitrogen and phosphate fertilizer manufacturer, focuses on domestic requirements, with urea exports unlikely to restart until May, Lawson indicated. Russian facilities, representing another major producer, already operate near maximum capacity.

The supply disruptions are already affecting Africa, where numerous agricultural producers depend on fertilizer imports from Middle Eastern and Russian sources.

Unusually heavy early rainfall in East Africa has provided producers with approximately one week of dry conditions to prepare fields and apply fertilizer, said Stephen Muchiri, a Kenyan maize producer and CEO of the Eastern African Farmers Federation, representing 25 million small-scale operators.

Fertilizer shortages and cost increases severely impact agricultural producers, compelling them to use reduced quantities and resulting in diminished yields. Brief delays alone can decrease maize production by approximately 4% per season, Patel noted, referencing Zambian research.

Government intervention options include implementing subsidies, encouraging domestic production, and regulating exports.

India currently subsidizes fertilizer to reduce financial pressure on agricultural producers, though these subsidies reduce funding available for long-term agricultural investments. The nation has allocated $12.7 billion this year specifically for urea subsidies, according to the U.S.-based Institute for Energy Economics and Financial Analysis.

Domestic urea production efforts have increased India’s reliance on imported gas, while excessive urea application has damaged local soil quality, said Purva Jain of IEEFA, who advocates for organic fertilizer alternatives.

Reduced dependence on imported fertilizers could shield agricultural producers and consumers from energy price fluctuations and climate-related disruptions, said Oliver Oliveros, executive coordinator of the Agroecology Coalition.

“This could be a turning point,” Oliveros concluded.