Fertilizer prices surge amid Iran war, sparking food security warnings

Farmers in the northern hemisphere are entering the critical spring months when major field work must begin. Meanwhile, their southern counterparts are busy harvesting crops before winter arrives.

But these efforts are being made because the Iran war has created severe supply constraints for key fertilizer products, fueling massive price increases and warnings of impending food insecurity.

Nearly a third of the global seaborne fertilizer trade passes through the Strait of Hormuz, according to the UN.

The waterway, a critical shipping route along Iran’s southern border, has been severely disrupted since the start of the war, with traffic brought to a virtual standstill and numerous ships hit by shells in or near the waterway.

Since the US and Israel attacked Iran on February 28, fertilizer prices, most of which are produced in the Middle East, have skyrocketed.

Fertilizer futures contracts are less liquid than other commodities, making prices more transparent. But analysts working in the industry told CNBC they saw the cost of FOB granulated urea (a precursor to nitrogen fertilizers) in Egypt rise from $400 to $490 before the war began, reaching nearly $700 per metric ton.

In a note published Monday, Oxford Economics’ Alpine Macro said prices for urea and ammonia have risen by about 50 percent and 20 percent, respectively, since the start of the war. The price of other fertilizers such as potash and sulfur also increased.

The Middle East is a particularly large exporter of urea and nitrogen products, according to Chris Lawson, CRU’s vice president of market intelligence and pricing.

“With the Strait of Hormuz essentially cut off, a large portion of global trade cannot move right now,” Lawson said. “We estimate that around 30% of exportable suppliers are currently unavailable in the market; these include Saudi Arabia, Qatar and Bahrain, but this also includes Iran.”

Iran is a major producer of nitrogen-based fertilizers and one of the world’s largest exporters, Lawson said.

“A lot of trade supplies are at risk; 30% of global urea trade comes from Iran and Hormuz-restricted countries,” he told CNBC.

“It’s a long supply chain; if farmers can’t get the urea they need, crop yields will inevitably fall. Nitrogen is the main nutrient a crop needs to grow. [and] “There will be stocks that can be reduced, so you won’t see an impact on crop yields and a loss in crop production until later in the year.”

Dawid Heyl, associate portfolio manager for Ninety One’s Global Natural Resources strategy, told CNBC that nitrogenous fertilizers such as urea are at the forefront of the Middle East crisis because, unlike other groups of fertilizers such as potassium and phosphates, nitrogen is “the only element you need to get on site every year.”

“You can skip a potassium season, you can skip a phosphate season, but you can’t skip a nitrogen season,” Heyl said.

The supply constraint intersected with cyclical demand as farmers in the northern hemisphere began fertilizing their fields. Urea, one of the world’s most used fertilizers, is used to grow a variety of crops, including corn, wheat, rapeseed and some fruits and vegetables.

“Ultimately, there is a direct correlation between your nitrogen application and your agricultural yield,” Heyl said. “That’s why I’m much more worried about the current crisis than I was when Russia-Ukraine happened four years ago.”

The two countries were at loggerheads when Moscow began its full-scale invasion of Ukraine in early 2022. Russia are major fertilizer exporters, accounting for a significant portion of global potash production. Sanctions imposed on Russian exports increased pressure on an already scarce market and caused prices to rise.

Meanwhile, news agency Reuters reported that China, another major fertilizer exporter, also imposed export restrictions to protect its domestic market from famine. reported last week.

Ninety One’s Heyl said markets are entering 2026 with fairly high stocks of staples that are dependent on fertilizer deliveries, meaning there are “buffer stocks” that could help offset some shortages in corn, wheat, soybeans and rice.

“If agricultural productivity were [hypothetically] “I don’t think we’re going to be looking at hunger at 5% this year, but it will certainly lead to food inflation,” he told CNBC, noting that emerging market countries are more likely to feel the brunt of the impact.

“Unfortunately, the poorer countries of the world are more exposed to these crises,” Heyl said. he said. “For example, I think some African countries that import a lot of grain will be affected.”

Heyl added that India, which imports nitrogen fertilizers as well as natural gas to produce them domestically, is also facing shortages.

“I’m more worried [a country] “For regions that will be more vulnerable, like India, like East Africa,” he said. “Emerging markets east of Suez and the global south are often the last markets that can be met.” [inflated prices]”

But he noted that the United States is not completely free from the effects of the shock in fertilizer prices, noting that although America produces most of its own nitrogen fertilizer, the country “does not have self-sufficiency.”

About one-third of the nitrogen, phosphate and potash fertilizers used in the United States are imported, according to the U.S. Fertilizer Institute.

Heyl stated that increasing fertilizer prices are also reflected in the USA and said, “It will be inflationary for the farmer.” “Will there be some regions that cannot access fertilizer or have to ration it?”

A total of 54 agricultural groups recently wrote a letter to US President Donald Trump to call for “much-needed market relief for American farmers” amid rising fuel and fertilizer prices.

“As the planting season begins in earnest across much of the United States, the closure of the Strait of Hormuz has caused fuel and fertilizer prices to skyrocket,” they said. “The disruptions in maritime transport due to the ongoing conflict in Iran have important consequences for food security here and around the world.”