Iran war likely to cause fertilizer spike for years to come
Santiago Pascual-Meagher
Farmers Forum
The Iran war and the closure of the Strait of Hormuz are causing a massive supply chain bottleneck and spiking prices around the world.
This chokepoint, located along the Iranian border in the Persian Gulf, handles 30 per cent of the global seaborne fertilizer supply and has been disrupted since February due to the ongoing U.S. attacks on Iran.
Reduced fertilizer use leads to lower crop yields, which will eventually reduce food production. Ahmed El-Hoshy, the CEO of Fertiglobe, the world’s largest seaborne exporter of combined urea and ammonia, told the Wall Street Journal last month that if fertilizer cannot move through the Strait of Hormuz, grain prices will also continue to rise.
At the end of May, the Associated Press reported that fertilizer prices had spiked by 40 per cent in three months.
The main concern for crop farmers now is that fertilizer prices for 2027 could skyrocket. Urea and ammonia are among the major components of nitrogen fertilizer, by far the most important fertilizer for corn.
Retired U.S. Army Colonel Douglas Macgregor warned that the full impact of the conflict has yet to be felt. “The real impact of this war on us has not even struck us yet. That’s what people don’t understand,” Macgregor said.
He argued that fertilizer shortages could have significant implications for global food production. “No one brings this up. The fertilizer we don’t have now and haven’t had for months fails to cultivate crops that won’t grow. When those crops don’t grow, what does that mean six months from now? That means hunger. It means serious problems globally.”
Poor nations are likely to face famine. The conflict and closure of the waterway could cost up to 10 billion meals a week globally, CEO of Yara, a global crop nutrition and clean ammonia company based in Norway, told the BBC.
Canada will not go unscathed. Even though Canada produces urea and ammonia and will not be as affected as other countries, Canadian fertilizer prices are set by global replacement values. Therefore, it does not matter whether the fertilizer is manufactured in Canada because the price farmers pay is tied directly to the cost of importing fertilizer from the world market.
Even if the strait were to reopen tomorrow, fertilizer prices are expected to remain above their pre-war levels. North Dakota State University agricultural economist Shawn Arita told the New York Times that if the strait reopens, fertilizer prices will eventually decline but are likely to remain above pre-war levels for years to come.
Pre-war, between 110 and 130 ships passed through the strait every day, the Financial Post reported. When the strait closed, the number of ships daily going through the strait was reduced to a handful during the worst week in April. Last month to June 24, saw a huge improvement as anywhere from 5 to 70 ships passed through in one day. Most were not fertilizer ships.
According to Bloomberg and Kpler, there were 40 ships laden with fertilizer in the strait in mid-June with nowhere to go.
The United States and Israel began the war in Iran with air attacks in mid-February, based on the argument that they did not want Iran to develop nuclear weapons. After the U.S. bombed a school in Iran, killing 160 children, Iran retaliated by closing the strait on March 2. Since then, U.S. President Donald Trump has declared a peace settlement 39 times. The latest agreement in mid-June appeared serious until Israel attacked Lebanon within 24 hours.
