Analyzing the Middle East Situation's Impact on Global Agriculture: Rising Fertilizer Prices and Challenges in Spring Planting

The Strait of Hormuz carries one-fifth of the world’s oil shipments and about one-third of global maritime fertilizer trade. It is both an “oil route” and a “grain route.” Industry experts believe that as the Northern Hemisphere enters the planting season, fertilizers and oil in the Gulf region are being delayed due to blocked shipping lanes caused by the US-Israel-Iran conflict, leading to risks of fertilizer shortages, increased shipping costs, and rising food prices.

Natural gas is a key raw material for nitrogen fertilizer production. The Middle East is both a major exporter of liquefied natural gas and a primary supplier of common nitrogen fertilizers like urea. Currently, shipping disruptions through the Strait of Hormuz have made it difficult for agricultural powerhouses like Brazil and Sudan to purchase Middle Eastern nitrogen fertilizers, while countries like India and Pakistan struggle to obtain raw materials for fertilizer production.

Brazil is a major global producer and exporter of agricultural products, heavily reliant on imports of nitrogen fertilizers from the Middle East, Russia, and North Africa. Bernardo Silva, executive director of the Brazilian Fertilizer Raw Material Industry Association, stated that the current Middle Eastern conflict exposes the “fragility of Brazil’s fertilizer market.”

According to data from market research firm Kpler, several ships have recently been stranded in the Gulf region, carrying nearly 1 million tons of fertilizer in total. Ideally, even if these fertilizers are shipped immediately, it would take several weeks to reach ports in various countries, then be transferred via inland barges, trucks, or trains to farms. Most fertilizers need to be applied before crops begin to grow; any delay could mean missing the spring planting season this year.

The seasonal and global nature of the fertilizer market amplifies the supply risks triggered by the Middle East situation. On one hand, unlike oil, fertilizer markets are typically driven by planting seasons, and most countries lack strategic reserves. On the other hand, the global fertilizer market is highly interconnected—disruptions in one region can affect prices worldwide.

The German Frankfurter Allgemeine Zeitung recently reported that since shipping through the Strait of Hormuz has been blocked, fertilizer prices have surged. Urea prices have risen about 30% in a week, reaching their highest level since 2022.

“Clearly, there are no ships (carrying fertilizer) departing from the Gulf region now, and the fertilizer market will face a huge gap,” said Ginny Breach, a data scientist at the University of Colorado Boulder.

The global fertilizer supply shock could ultimately lead to food shortages and price hikes. Joseph Glauber, senior research fellow at the U.S. International Food Policy Research Institute, said higher fertilizer prices will influence crop choices. “Farmers may opt for crops that require less fertilizer instead of nitrogen-intensive crops to avoid higher input costs. Farmers in some poor countries might reduce fertilizer use directly, which could lead to lower yields.”

U.S. media reports indicate that soybeans require less fertilizer than corn. Given the current price increases and supply uncertainties, some American farmers are planning to expand soybean planting areas.

Due to ongoing shipping disruptions through the Strait of Hormuz, international crude oil futures prices again surpassed $100 per barrel at the start of the new trading week on the evening of the 15th. Oil prices are closely linked to food prices, affecting multiple links in the food supply chain—from fertilizer used in the fields to transportation vehicles delivering produce to supermarkets, with energy costs impacting overall food security.

Generally, some foods are not highly storable, especially fresh produce, meat, and dairy, which are prone to spoilage. This makes it difficult for companies to stockpile large quantities, and prices for these fresh foods are very sensitive to oil price fluctuations.

Qatar’s Al Jazeera reported that refrigeration and preservation equipment may rely on natural gas or diesel power, and polyethylene used in food packaging is a petrochemical byproduct. Transportation between farms, cold storage facilities, packaging plants, and supermarkets still heavily depends on fuel, with energy prices directly increasing costs along the food supply chain.

Deborah Winsberg, CEO and founder of Corset Research, said consumers will feel the impact of rising fuel prices through price tags on supermarket produce, meats, and dairy products, reflecting supply chain disruptions.

In some low-income countries, a significant portion of household income is spent on food. These countries import large quantities of grains and fertilizers, and rising oil prices could quickly trigger food shortages. A recent report from the United Nations Conference on Trade and Development stated that shipping disruptions through the Strait of Hormuz could push up food prices, with particularly severe impacts on the most vulnerable economies.

Source: Xinhua News Agency

Author: Chen Sida