‘The conflict is coming at nearly the worst possible time, the spring planting season,’ economist Peter Earle said.
Much of the economic focus during the war in Iran has been on oil and gas supplies, but the interruption of an essential byproduct, fertilizer, may soon impact farmers as planting season begins.
Fertilizer that farmers use in crop production is derived from natural gas or is processed using natural gas.
About 30 percent of the world’s fertilizer product passes through the Strait of Hormuz, which Iran has constricted, according to an April 1 report by the International Food Policy Research Institute (IFPRI).
The United Nations reports that shipping through the strait has fallen from an average of more than 100 ships daily to fewer than 10.
Consequently, over the past month, prices rose sharply for five of the eight major fertilizer types, according to DTN, an agriculture data analytics firm. Prices for urea were up 35 percent over the past month, jumping from $677/ton to $826/ton in the last week alone, and anhydrous ammonia and UAN32 fertilizers were both up 20 percent over the prior month.
“The world is now learning just how important the Strait of Hormuz is,” Caleb Jasso, a policy expert at the Institute for Energy Research, told The Epoch Times. “A great deal of trade of all kinds goes through that choke point, including a very sizable portion of the fertilizer market for the world.”
Gulf States a Critical Source
IFPRI estimates that 36 percent of all global urea exports and about 29 percent of global ammonia exports are shipped through the strait, as well as 26 percent of diammonium phosphate fertilizer and 13 percent of monoammonium phosphate fertilizer.
“A large share of globally traded urea, ammonia, sulfur, and LNG-linked feedstock moves through the Gulf, so the war’s effect is being felt primarily through shipping disruption, marine insurance costs, and vessel delays, rather than outright destruction of production facilities,” Peter Earle, senior economist at the American Institute for Economic Research, told The Epoch Times.
“The conflict is coming at nearly the worst possible time, the spring planting season, when Corn Belt growers are locking in nitrogen purchases for the highest-input crop in the U.S. agricultural system. If the bottleneck were to persist for several months, a likely outcome would include renewed food inflation pressure in the second half of the year, especially in protein-heavy and grain-based categories.”
Cyndie Shearing, Farm Bureau communications director, warned that “unless the delivery of critical farm inputs such as urea, ammonia, nitrogen, phosphate, and sulfur-based products is strategically prioritized, the U.S. risks a shortfall in crops.” She called the supply interruptions “a threat to our food security—and by extension our national security.”
American farmers are struggling with shrinking margins and say that fertilizer prices were already rising before the Iran war started, with many blaming what they say is a “duopoly” in the fertilizer supply market.
